(Last Word) Suppose You Borrow $500 for a Year and the Lender

question 57

Multiple Choice

(Last Word) Suppose you borrow $500 for a year and the lender discounts $75 of interest at the time the loan is made (giving the borrower only $425) . The interest rate on this loan is about

• A) 12.5 percent.
• B) 14.5 percent.
• C) 17.6 percent.
• D) 10 percent.

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Definitions:

Compounded Quarterly

Refers to the calculation of interest which is added to the principal balance four times within a year, enhancing the amount of future interest earned.

Annual Rate

The interest rate for a period of one year, often expressed as an annual percentage rate.

Compounded Quarterly

This is the procedure of determining interest by adding it to the original investment amount as well as the previously accumulated interest, performed every quarter.

Semi-Annual Period

A six-month time frame or duration, often used in the context of payments, compounding interest, or reporting intervals.