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18 lip 2022 · Example \ (\PageIndex {5}\) Francisco borrows $1200 for 10 months at a simple interest rate of 15% per year. Determine the discount and the proceeds. Solution. The discount \ (D\) is the interest on the loan that the bank deducts from the loan amount.
The factor (1+ rt)−1 in formula (3) is called a discount factor at a simple interest rate r and the process of calculating P from S is called discount-ing at a simple interest rate r, or simple discount at an interest rate r. We can display the relationship between P and S on a time diagram. P = S(1+ rt)−1.
2.4.1 Simple Discount at an Interest Rate; 2.4.2 Simple Discount at a Discount Rate
1) If an amount of $2,000 is borrowed at a simple interest rate of 10% for 3 years, how much is the interest? 2) You borrow $4,500 for six months at a simple interest rate of 8%. How much is the interest?
The discount rate refers to the percentage by which the price of an item has been reduced. It is calculated by taking the difference between the list price (original price) and the selling price (discounted price), dividing it by the list price, and multiplying by 100 to express it as a percentage.
Since the annual effective interest rate is a constant 10%, the accumulation function is a(t) = (1:1)t, and therefore the discount function is (1:1) t. To compute the present value of $100 a year from now, we evaluate the discount function at. t = 1 and multiply it by 100.
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