In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $20,000 and the interest rate is 10%, the borrower "pays" 0.10 * $20,000 = $2,000 immediately, thereby receiving net funds of $18,000 (=$20,000-$2,000) and repaying $20,000 in a year. "What is the implied rate on this loan?"a. 10%b. 9.5%c. 11.1%d. 20%
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Home » Business » In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $20,000 and the interest rate is 10%, the borrower "pays" 0.