Sa800 wrote:
Cn someone provide a thorough explanation…?
It looks like you might need to know some terms for this problem…. The 15% deducted up front made no sense. This whole problem makes no sense!
Firstly let me admit I am not too fond of the question, and find it a bit surprising to come from
OG.
The question talks of discounted interest and loan proceeds, terms that many excl bankers etc may not be very comfortable with. Although a bit of explanation is given but doesn't seem to be very clear, especially on loan proceeds.
SolutionThe discounted interest is cut upfront from the loan amount.
Discount is 15/12 , that is 15% for 12 months, so Discounted interest = 15% of n or 0.15n
Loan proceeds is the amount of loan that has to be paid back. Thus, loan amount is n-0.15n = 0.85n
Next, Repayment amount is the entire amount, so n.
What I can think of an example as?
Say someone has a property worth $1 million dollars.
He can get a loan upto 80% or say he takes a loan of $0.80 million dollars.
The 15% interest of $0.80 million dollars is cut from the loan amount, so what is given as loan is
0.85*$0.80 million dollarsRepayment is this 0.85*$0.80 million dollars plus the interest of 0.15*$0.80 million dollars that was paid initially itself before recieving the balance amount.
Total = 0.85*$0.80 million dollars + 0.15*$0.80 million dollars =
1.00 * $0.80 million dollars.In above, replace $0.80 million dollarsby n.
So the solution ( refer bold portion and replace ) $0.80 million dollars by n
Loan =
0.85*$0.80 million dollars = 0.85nRepayment =
1.00 * $0.80 million dollars = 1.00n