Thrifty Home Loan Corp. uses the discount method of calculating finance charges. For the two loans below, calculate the discount amount that Thrifty is charging and the proceeds that go to the borrower. Then calculate the actual interest rate which is based on proceeds rather than the face value. Use a 360-day year and compute actual rates to the nearest 1/100 of a percent. Round amounts to the nearest cent.
|
Face Value |
Discount Rate |
Time |
Discount Amount |
Proceeds |
Actual Interest Rate |
| a. |
$5,000 |
9% |
135 days |
$________ |
$________ |
______ % |
| b. |
$3,480 |
8% |
270 days |
$________ |
$________ |
______% |
Moneywise Loans and Credit Corp. makes many consumer loans by discounting the face value of the loan. The borrower gets the proceeds. For the two loans below, determine the amount of the discount, the proceeds, and the actual interest rate which is based on the proceeds rather than the face value. Use a 365-day year and compute actual rates to the nearest 1/100 of a percent. Round amounts to the nearest cent.
|
Face Value |
Discount Rate |
Time |
Discount Amount |
Proceeds |
Actual Interest Rate |
| a. |
$14,800 |
6.9% |
92 days |
$__________ |
$_________ |
_______% |
| b. |
$10,000 |
10.3% |
180 days |
$__________ |
$_________ |
_______% |
Wei Fang Food Importers often tries to take advantage of cash discounts, even if it must borrow the money for a few days in order to pay the invoice in time. Compute the savings on Wei Fang's purchases and terms from two different suppliers. Use a 365-day year. Assume that the number of interest days is the time between the due date and the last date to take advantage of the cash discount. Round your answers to two decimal places, if necessary.
|
Invoice |
Terms |
Cash Discount |
Interest Rate on Loan |
Days of Interest |
Amount of Interest |
Savings |
| a. |
$2,650 |
3/5, n/15 |
$______ |
9% |
_________ |
$________ |
$________ |
| b. |
$3,600 |
2/10, n/30 |
$______ |
10% |
_________ |
$________ |
$ |