This question illustrates what is known as discount, Ask an Expert

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This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $20,000 for one year. The interest rate is 17.25 percent. You and the lender agree that the interest on the loan will be .1725 × $20,000 = $3,450. So, the lender deducts this interest amount from the loan up front and gives you $16,550. In this case, we say that the discount is $3,450.

Required:

What is the interest rate on this loan?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91594336

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