A loan of $3000 is taken for 4 years at a Banker's Discount of $600. What is the

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Question: A loan of $3000 is taken for 4 years at a Banker\'s Discount of $600. What is the rate of interest?

Options:

Correct Answer: 6%

Solution:

Rate = (Banker\'s Discount / (Principal × Time)) × 100 = (600 / (3000 × 4)) × 100 = 5%.

A loan of $3000 is taken for 4 years at a Banker's Discount of $600. What is the rate of interest?

A loan of $3000 is taken for 4 years at a Banker's Discount of $600. What is the rate of interest?

Step 1: Identify the values given in the problem. The principal amount (loan) is $3000, the time is 4 years, and the Banker's Discount is $600.
Step 2: Understand the formula to find the rate of interest. The formula is: Rate = (Banker's Discount / (Principal × Time)) × 100.
Step 3: Substitute the values into the formula. Replace Banker's Discount with 600, Principal with 3000, and Time with 4.
Step 4: Calculate the denominator (Principal × Time). This is 3000 × 4 = 12000.
Step 5: Now, divide the Banker's Discount by the result from Step 4. This is 600 / 12000.
Step 6: Calculate the division. 600 / 12000 = 0.05.
Step 7: Multiply the result from Step 6 by 100 to convert it to a percentage. 0.05 × 100 = 5%.
Step 8: Conclude that the rate of interest is 5%.

Banker's Discount – Banker's Discount is the interest deducted in advance on a loan, calculated on the principal amount for the entire loan period.
Rate of Interest Calculation – The formula for calculating the rate of interest using the Banker's Discount, principal, and time.
Understanding Principal and Time – Recognizing the importance of principal amount and time duration in financial calculations.