Question

There are 3 parts to this problemb) the amount of money receivedc) the true interest rate

Answer 1

a) ask us to find the discount amount. we can calculate whis using the formula:

$I=\text{Prt}$

Where I is the discounted amount. Then:

$I=940,000\cdot0.045\cdot10=423,000$

(remember that r must be in fraction form, thus we divide the percentage by 100)

I = $423,000 is the answer to a).

Now for b):

The net amount received is the loan minus the discount:

$940,000-423,000=517,000$

The answer to b) is $517,000

For c)

Using the same formula as a), I = Prt, but now r is the rate we want to find:

I is the discount, P is the real loan (the answer to b) and t is the time,

$\begin{gathered} \begin{cases}I=423,000 \\ P=517,000 \\ t=10ys\end{cases} \\ 423,000=517,000\cdot r\cdot10 \end{gathered}$

Then solve:

$\frac{423,000}{5,170,000}=\frac{9}{100}\approx0.08$