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If the Add-On Method Is Used to Calculate a Finance

question 21

True/False

If the add-on method is used to calculate a finance charge of $100.80 on a $1,800 loan,the amount to be repaid is $1,900.80.


Definitions:

Discount Rate

The discount rate is the interest rate used to calculate the present value of future cash flows in discounted cash flow analysis, reflecting the risk and opportunity cost of capital.

Pretax Return

The income an investor or business earns before any taxes are deducted.

Net Present Value

A financial measurement that calculates the value of a project or investment by discounting the expected future cash flows to their present value using a specific discount rate.

Tractor-Trailer

A vehicle configuration consisting of a front tractor unit coupled to a trailer carrying cargo.

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