What is the effective interest rate on this one year loan

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Reference no: EM13296778

A discount interest loan is a loan arrangement where the interest and any other related charges are calculated at the time the loan is closed. suppose a one-year loan is started as $10,000 and the interest rate is 12%. Then, the borrow pays $1,200 interest up front, thereby receiving net funds of $8,800 and repaying $10,000 in a year. Whats the effective interest rate on this one year loan?

Reference no: EM13296778

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