This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $18,000 for one year. The interest rate is 14.6 percent. You and the lender agree that the interest on the loan will be .146 × $18,000 = $2,628. So, the lender deducts this interest amount from the loan up front and gives you $15,372. In this case, we say that the discount is $2,628. What’s wrong here?