A bank lends money using a simple discount rate d = 8%.If John needs $10,000 today and will repay the loan in 8 months,what loan amount should he request?
A)$10,800.00
B)$10,533.33
C)$10,563.38
D)$9,466.67

Question

Quizplus · Accepted Answer

The formula for calculating the loan amount using simple discount is:

Loan Amount = (Principal + (Principal * Discount Rate * Time))

Where: 
Discount Rate = 8% = 0.08 (decimal value)
Time = 8/12 years = 0.67 (decimal value) since the loan is being repaid in 8 months

Substituting the given values in the formula, we get:

Loan Amount = (10000 + (10000 * 0.08 * 0.67))
Loan Amount = (10000 + 536)
Loan Amount = $10,536

Therefore, John should request a loan amount of $10,536 (approximately). The closest option is C, $10,563.38, which is the correct answer.

A Bank Lends Money Using a Simple Discount Rate D