Question
A discount interest loan is a loan arrangement where the interest and any other related charges are calculated at the time the loan is closed.
A discount interest loan is a loan arrangement where the interest and any other related charges are calculated at the time the loan is closed. Suppose a one-year loan is stated as $12,000 and the interest rate is 12%. The borrower then pays $1,440 interest up front, thereby receiving net funds of $10,560 and repaying $12,000 in a year. What is the effective interest rate on this one-year loan?
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Airline Finance
Authors: Peter S. Morrell
4th Edition
1351959743, 978-1351959742
