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Bond [772]
4 years ago
13

On April 31, 2018, Elkhorn Associates borrowed $10 million cash from Colonial Bank and issued a 5-month, noninterest-bearing not

e, 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.
Business
1 answer:
Nady [450]4 years ago
4 0

Answer:

b. Less than the effective interest rate

Explanation:

The stated discount rate on this loan is Less than the effective interest rate

As the note is noninterest-bearing note, the stated discount rate on this loan is less than the effective interest rate.

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