2. 60.

Discount interest loans [LO 6.4] This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $25 000 for one year. The interest rate is 14.9 per cent. You and the lender agree that the interest on the loan will be 0.149 × $25 000 = $3 725. So the lender deducts this interest amount from the loan up front and gives you

$21 275. In this case, we say that the discount is $3 725. What is wrong here?