Quiz 13.33 – Stated Discount Rate vs. Effective Interest Rate on a Noninterest-Bearing Note

Intermediate Accounting

Spiceland, Nelson, and Thomas

10th Edition

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Considering Elkhorn Associates' $10 million cash borrowing from Colonial Bank with a 5-month, noninterest-bearing note at an effective interest rate of 10%, which statement accurately describes the relationship between the stated discount rate and the effective interest rate?

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