Problem 6.60 – Uncovering the True Interest Rate in Discounted Loans
Fundamentals of Corporate Finance
Ross, Westerfield, and Jordan
13th Edition
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.