This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $33,000 for one year. The interest rate is 20.5 percent. You and the lender agree that the interest on the loan will be .205 $33,000 = $6,765. So, the lender deducts this interest amount from the loan up front and gives you $26,235. In this case, we say that the discount is $6,765. What is the interest rate on this loan?