In a discount interest loan you pay the interest payment up, Ask an Expert

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In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $24,000 and the interest rate is 21.75%, the borrower "pays" 0.2175 × $24,000 = $5,220 immediately, thereby receiving net funds of $18,780 and repaying $24,000 in a year. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 21.75%?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91381252

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