SCB Capital Bank Uses the Discount Method of Calculating Finance

question 21

Short Answer

SCB Capital Bank uses the discount method of calculating finance charges on some loans. For the two loans below, calculate the discount amount that goes to Riverside and the proceeds that go to the borrower. Then, calculate the actual interest rate which is based on the proceeds rather than the face value. Use a 365-day year and compute actual rates to the nearest 1/100 of a percent.
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Definitions:

Cyclic AMP

A secondary messenger important in many biological processes, formed from ATP by the action of adenylyl cyclase.

Second Messenger

A substance (e.g., cyclic AMP or calcium ions) that relays a message from a signaling molecule (the first messenger) bound to a cell-surface receptor; leads to some change in the cell.

Protein Kinase A

An enzyme that transfers phosphate groups from ATP to specific proteins, playing a key role in the regulation of cellular processes.

Tyrosine Kinases

A family of enzymes that catalyze the transfer of a phosphate group from ATP to a tyrosine residue in a protein, playing key roles in signal transduction pathways.