(Cost 0f Bank Loan) For a one-year loan of $100 with an APR interest rate of 15%, determine the cash flows and the APY for each of the following loans: Interest in arrears, Discount loan, Interest in arrears with a 10% compensating balance, Discount loan with a 10% compensating balance© BrainMass Inc. brainmass.com March 4, 2021, 10:38 pm ad1c9bdddf
Interest in arrears - In this case interest is paid at the end of the year and so the APY would be the same as the APR of 15%
Discount loan - In this case the interest is deducted at the start of the loan. Interest amount is 100 X 15% = $15. So actual amount ...
This solution explains how to calculate the interest rates on different types of loans.