This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $21,000 for one year. The interest rate is 17.5 percent. You and the lender agree that the interest on the loan will be .175 $21,000 = $3,675. So, the lender deducts this interest amount from the loan up front and gives you $17,325. In this case, we say that the discount is $3,675. What is the interest rate on this loan?