In a discount interest loan, you pay the interest payment up front. For example, if a I-year loan is stated as $10,000 and the interest rate is 10%, the borrower "pays" .10 x $10,000 = $1,000 immediately, thereby receiving net funds of $9,000 and repaying $10,000 in a year.

a. What is the effective interest rate on this loan?

b. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 20%?