This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $34,000 for one year. The interest rate is 13.9 percent. You and the lender agree that the interest on the loan will be .139 $34,000 = $4,726. So the lender deducts this interest amount from the loan up front and gives you $29,274. In this case, we say that the discount is $4,726.