The effective interest rate generally is ________.
A) higher on a loan if interest is paid at maturity
B) lower if the loan is a discount loan
C) higher if the loan is a discount loan
D) not affected by whether the loan is a discount loan or a loan with interest paid at maturity

Question

Quizplus · Accepted Answer

The effective interest rate takes into account the time value of money and any fees or charges associated with the loan. A discount loan has a lower face amount than the amount the borrower actually receives, resulting in a higher effective interest rate.

The Effective Interest Rate Generally Is ________