A college freshman borrowed P2,000 from a bank for his tuition fee and promised to pay the amount for one year. He received only the amount of P1,920 after the bank collected the advance interest of P80.00. What was the rate of discount? A. 3.67 % B. 4.00 % C. 4.15 % D. 4.25 %

The correct answer is A. 3.67 %.

The rate of discount is the percentage of the face value of a bill that is deducted from the face value when the bill is discounted before it matures. In this case, the face value of the bill is P2,000 and the amount of the discount is P80.00. Therefore, the rate of discount is 80/2000*100 = 4%. However, since the discount is taken at the beginning of the loan period, the effective rate of interest is higher than 4%. To calculate the effective rate of interest, we can use the following formula:

Effective rate of interest = (1 + (rate of discount/100))^n – 1

where n is the number of years in the loan period. In this case, n = 1. Therefore, the

Effective rate of interest = (1 + (4/100))^1 – 1 = 3.67%

Therefore, the correct answer is A. 3.67 %.

The other options are incorrect because they do not take into account the fact that the discount is taken at the beginning of the loan period.