You plan to borrow $2,000 to take a vacation and want to repay the loan in a year. The banker offers you a simple interest rate of 12 percent with repayments in two equal instalments, 6 months and 12 months from now.
What is your total interest bill? What is the APR? Would you prefer an add-on interest rate with one payment at the end of the year? If the bank applied the discount method to your loan, what are the net proceeds of the loan? What is your effective rate of interest rate?