This question illustrates what is known as discount, Financial Management

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This question illustrates what is known as discount

This question illustrates what is known as discount interest. Imagine you are discussing a loan with a somewhat unscrupulous lender. You want to borrow $23,000 for one year. The interest rate is 18 percent. You and the lender agree that the interest on the loan will be .18 × $23,000 = $4,140. So, the lender deducts this interest amount from the loan up front and gives you $18,860. In this case, we say that the discount is $4,140.

What is the interest rate on this loan?

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