Question

Loan amount: 13000

Method of payment:discount basis
Amount of interest: 625
Term of load: 1 year
Effective rate of interest( to the nearest tenth)

Answer 1

5.1%

Explanation:

The proceeds of the loan are ...

13000 -625 = 12375

The amount repaid is 13000. That amount is ...

13000/12375 = 1.05050505...

times the proceeds. So, the effective interest rate is ...

1.05051 -1 = 5.051% ≈ 5.1%