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 $32,000 for one year. The interest rate is 20.25 percent. You and the lender agree that the interest on the loan will be .2025 × $32,000 = $6,480. So, the lender deducts this interest amount from the loan up front and gives you $25,520. In this case, we say that the discount is $6,480. What is the interest rate on this loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Financial Management, Finance

Category:- Financial Management
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