Question

Cindy is taking out a loan today. The cash amount that she is receiving is equal to the present value of the lump sum payment that she will be required to pay two years from today. Which type of loan is this

Answer 1

Answer:

Pure discount

Explanation:

Cindy is taking a pure discount type of loan. A pure discount loan is the promise to pay a certain sum of money in the future in exchange for borrowing money today. Cindy gets money today and repays a single lump sum at a future date. A pure discount loan is where the principal is paid back at a future date without any periodic interest payments