In which type of loan does the borrower initially receive the present value of the future lump sum loan repayment amount?

Question

Quizplus · Accepted Answer

In a pure discount loan, the borrower receives the present value of a future lump sum repayment amount at the initiation of the loan. There are no interest payments or repayments of principal until the loan's maturity date, at which point the borrower repays the full amount borrowed. Therefore, option A is correct. Option B, C, D, and E are incorrect as they involve interest payments or repayments of principal at different stages of the loan repayment.

In Which Type of Loan Does the Borrower Initially Receive