A) higher on a loan if interest is paid at maturity.
B) lower if the loan is a discount loan.
C) not affected by whether the loan is a discount loan or a loan with interest paid at maturity.
D) higher if the loan is a discount loan.
The effective interest rate is?
I'm going to go with B.
Not really sure what your definition of discount loan is, but assuming that it means amortizing (loan is getting paid off as you go), your balance decreases and the interest charges do as well.
Reply:I would say C)
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