On a non-interest bearing, discounted note, it is possible for the stated interest rate to differ from the effective interest rate.

Question

Quizplus · Accepted Answer

In a non-interest bearing, discounted note, the interest is already deducted from the face value of the note at the time of issuance. Therefore, the stated interest rate on the note may be different from the effective interest rate, which takes into account the discount at which the note was sold.

On a Non-Interest Bearing, Discounted Note, It Is Possible for the Stated