﻿ This question illustrates what is known as discount interest.Imagine you are discussing a loan with

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### Question

This question illustrates what is known as discount interest.Imagine you are discussing a loan with a somewhat unscrupulouslender. You want to borrow \$27,000 for one year. The interest rateis 13.2 percent. You and the lender agree that the interest on theloan will be .132 × \$27,000 = \$3,564. So the lender deducts thisinterest amount from the loan up front and gives you \$23,436. Inthis case, we say that the discount is \$3,564. What is theeffective interest rate?

### Solution

xx the xxxxxxxx/ interest xx \$xxxx, xxx amount xxxxxxxx in xxxxxx \$xxxxx.xxxx xx a xxy means xxxx xxx xxxx amount xx \$23436 xx xxxxxxxxxxxxx xxxxxxx is \$xxxx.xxxxxxxxx, effective xxxxxxxx xxxxx xx 3564/23436 * 100 = xx.xx%(xxxxxx)