Your bank has agreed to grant you a discount loan with an APR of 4.25%. If you need $8,000 today, how large is the face value of the loan?
A) $8,355
B) $8,000
C) $7,845
D) $7,641
Answer: A
Explanation: A) To receive $8,000, the size of the discount loan must be net loan amount ÷ (1 - r)
= $8,000 ÷ (1 - .0425) = $8,355.
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