Problem 6.60 – Uncovering the True Interest Rate in Discounted Loans

Fundamentals of Corporate Finance

Ross, Westerfield, and Jordan

13th Edition

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Difficulty – Medium

Determine the true interest rate on a loan where an unscrupulous lender deducts the interest up front as a discount, resulting in a reduced loan amount. Calculate the interest rate without rounding intermediate calculations and provide the answer to two decimal places. Find the effective interest rate.

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