Banks and Other Financial Institutions
... The following three one-year "discount loans are available to you: Loan A: $120,000 at a 7% discount rate Loan B: $110,000 at a 6% discount rate
Loan C: $130,000 at a 6.5% discount rate
a. determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?
b. Calculate the percent interest rate or effective cost of each loan. Which one has the lowest cost?
a, amount of interest for Loan A is $ 8,400
interest = 120,000 x 7% = 8,400
net proceed of loanA = 120,000 minus 8,400 = $ 111,600
amount of interest for Loan B is $ 6600
interest = 110,000 x 6% = $ 6,...