Option 1: P = Po + Po*r*t.
P = 12,000 + 12,000*(0.08/12)*9 = 12,000 + 720 = $12,720.
I = $720.
Option 2: Ar = Ab-Ab*r*t.
Ar = 12,000-12,000*(0.07/12)*9 = 12,000 - 630 = $11,370 = Amt. received. I = $630.
Gary should choose Option 2.
Gary can get two loan, $12,000 at 8% simple interest for 9 months or a $12000 9- month discounted loan at 7% discount. based on the actual interest paid and the true rate on the discounted loan, which of the two loan offers will Gary choose
1 answer
1 answer