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The simple interest rate of 12% corresponds to a discount rate on a loan of R100 for one Year equaling:
A) 13.64%
B) 10.71%
C) 12.00%
D) 13.44%
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In this problem, the most difficult part is to understand what they want from you.
I will explain it to you in full details.
If you borrow R100 at the simple interest rate of 12% for one year, then
you should return R(100 + 0.12*100) = R100 + R12 = R112 at the end of the year.
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| Now the question of the problem is: if you borrow R100, |
| but you should return R112 at the end of the year, |
| what is the discount rate of this loan? |
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The answer is: the discount rate of this loan equals = use your calculator = 0.1071 (rounded) = 10.71%,
which is option (B) of your list.
Solved.