This question illustrates what is known as discount interest . Imagine you are d

Question

This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $19,000 for one year. The interest rate is 12.4 percent. You and the lender agree that the interest on the loan will be .124 × $19,000 = $2,356. So the lender deducts this interest amount from the loan up front and gives you $16,644. In this case, we say that the discount is $2,356.

What is the effective interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $19,000 for one year. The interest rate is 12.4 percent. You and the lender agree that the interest on the loan will be .124 × $19,000 = $2,356. So the lender deducts this interest amount from the loan up front and gives you $16,644. In this case, we say that the discount is $2,356.

Explanation / Answer

What is the effective interest rate

=(19000/16644)-1

=14.16%

the above is the answer.....

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