This question illustrates what is known as discount interest. Imagine you are discussing a loan with a
Question:
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 14.6 percent. You and the lender agree that the interest on the loan will be .146 × $20,000 = $2,920. So the lender deducts this interest amount from the loan up front and gives you $17,080. In this case, we say that the discount is $2,920. What’s wrong here?
Step by Step Answer:
The problem is that the borrower is being charged the full interest rate on the ...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
Related Video
Interest, debt, finance, and capital markets are all important concepts in the world of economics and business. Interest is the cost of borrowing money, and it is typically expressed as a percentage of the amount borrowed. Debt is the money that is borrowed, and it has to be repaid with interest. Finance is the study of how individuals, companies, and organizations manage their money and investments. Capital markets are the places where companies and governments can raise money by selling stocks and bonds to investors. These markets play an important role in the overall economy by helping to fund investment and growth.
Students also viewed these Business questions
-
Discount Interest Loans this question illustrates what is known as discount interest imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year....
-
This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $25,000 for one year. The interest rate is 15...
-
Discount Interest Loans this question illustrates what is known as discount interest imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year....
-
You plan to "go green" and install solar panels on your home in 36 months. The solar company has a payment plan whereby you will pay for the panels in 120 monthly payments (installments) starting in...
-
Calculate Go at 25oC for the reaction See Appendix C for values of Gof. What is the value of the solubility product constant, Ksp, for this reaction at 25oC? CaF2s)Ca (a) 2F (aq)
-
How should we combine the multiple measures in a balanced scorecard into determining a divisions overall performance?
-
What is a say-on-pay vote?
-
Kobeer Inc. manufactures and sells three types of shoes. The income statements prepared under the absorption costing method for the three shoes are as follows: In addition, you have determined the...
-
which muscle were use to extend and splay your finger outward?
-
Forrest runs Y Not Flowers, Inc. (YNF), a wholesale flower distributor with stores in several major metropolitan areas of the U.S. He is considering expanding his business, but he thinks his current...
-
An All-Pro defensive lineman is in contract negotiations. The team has offered the following salary structure: Time Salary 0 $7,900,000 1 $4,500,000 2 $5,300,000 3 $6,100,000 4 $6,700,000 5...
-
After deciding to acquire a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $49,000. The dealer has a special leasing arrangement where you...
-
How does one calculate the number of microstates associated with a given configuration?
-
Conduct a diversity audit for Amazon (ensure that data is available on diversity to enable you to conduct the audit). For the audit, you need to establish the diversity of the organisation (focus on...
-
Identify two additional issues you see affecting compensation professionals in the future and provide a quick summary of each, how those issues will affect HR/Compensation and Benefits, and how can...
-
Design (outline with narrative) a performance evaluation system that would replace the Cisco ranking system. How would it operate and what would be the performance criteria to be used? Support your...
-
If someone earns 4 5 , 0 0 0 per year while the other person earns 6 0 , 0 0 0 per year and they want to know if they should file their taxes together or separately assuming that no adjustments...
-
identify and critiques one or more dominant contemporary discourses about work and unemployment, and explain how these discourses have supported or hindered socially just welfare policy.?
-
Construct an orthonormal basis for R3 with respect to the inner products defined by the following positive definite matrices: (a) (b) 2 23] 420 142 311
-
Which of the following gives the range of y = 4 - 2 -x ? (A) (- , ) (B) (- , 4) (C) [- 4, ) (D) (- , 4] (E) All reals
-
For 2011, calculate the cash flow from assets, cash flow to creditors, and cash flow to stockholders.
-
Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals compared to ROE considered by itself.
-
Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals compared to ROE considered by itself.
-
The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring high school students, on a commission basis, to sell...
-
Linda's Luxury Travel (LLT) is considering the purchase of two Hummer limousines. Various information about the proposed investment follows: Initial investment (2 limos) Useful life Salvage value...
-
Assume you have a speech audio samples with bit depth of 13 bits. It is a common setting to produce a digital representation of the full range speech signals. However, this is too expansive for many...
Study smarter with the SolutionInn App