Question

Dr. Painkiller is going to borrow $7,100 for one year at 14 percent interest. What is the annual rate of interest if the loan is discounted? (Use 365 days in a year. Do not round intermediate calculation. Round the final answer to 2 decimal places.) Annual rate of interest ()%

Answer 1

To find the annual rate of interest when a loan is discounted, divide the discount amount by the loan amount and multiply by 100%.

Step-by-step explanation:

To find the annual rate of interest when a loan is discounted, we can use the formula:

Annual interest rate = Discounted amount / Loan amount * 100%

In this case, the loan amount is $7,100 and the discount amount is the interest earned on the loan. Since the loan is for one year and the interest rate is 14%, the discount amount is $7,100 * 0.14 = $994.

Now, we can calculate the annual rate of interest:

Annual interest rate = $994 / $7,100 * 100% = 14%