This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $34,000 for one year. The interest rate is 13.9 percent. You and the lender agree that the interest on the loan will be. 139 * $34,000 = $4,726. So the lender deducts this interest amount from the loan up front and gives you $29,274. In this case, we say that the discount is $4,726. What is the effective interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Effective interest rate %
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Home » Business » This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $34,000 for one year. The interest rate is 13.9 percent.