Question

Question #1

Chris Shopper received a $1,000 discount loan to purchase a washer and dryer. The loan was offered at 12% for 120 days. What are the proceeds?

$___

Question #2
Carl Cornfield has a short term loan at 18% interest per year. He pays the interest monthly and wants to know the annual percentage rate?

APR (to the nearest tenth) = ___%

Answer 1

Q1. Interest is paid from the loan value. The remaining amount is the proceeds.

... I = Prt = $1000·0.12·(120/360) = $40 . . . . amount of interest

The proceeds are then

... $1000 - 40 = $960

Q2. In the absence of loan fees, the given annual rate is the APR, 18.0%.

The effective rate when 18% is compounded monthly is

... (1 +0.18/12)^12 - 1 ≈ 19.6%

This does not appear to be what the question is asking.