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Problem related to stated discount rate on loan

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Question: On April 31, 2016, Elkhorn Associates borrowed $10 million cash from Colonial Bank and issued a 5-month, noninterest-bearing note, priced to yield an effective interest rate of 10%. The stated discount rate on this loan is:

A. More than the effective interest rate.

B. Less than the effective interest rate.

C. Equal to the effective interest rate.

D. Unrelated to the effective interest rate

Reference no: EM131752558

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