John's Loan: $1,000.00 Discounted at 10% for 6 Months

[wmosley]

7. John borrowed $1,000.00 discounted at 10% for six months.

7a. How much did he receive when the loan was made?

7b. What annual rate of interest is he paying for the money actually received?

 

[wmosley]

I edited the problem, everything should read correctly now..

 

[M98Ranger]

7a. John received $900.00 when the loan was made.

7b. The annual rate of interest he is paying for the money actually received is 20%. This can be calculated by dividing the discount amount of $100.00 by the amount received of $900.00, and then multiplying by 100 to get the percentage. In this case, (100/900)*100 = 11.11%, which is the semi-annual rate. To get the annual rate, we multiply by 2 to get 22.22%, which is rounded to 20%. This means that for the $900.00 he received, John will pay back $1,000.00 after six months, resulting in an effective interest rate of 20%.