What is the discount rate implicit in the amortization schedule presented above?
A) 12%
B) 10%
C) 8%
D) 6%

Question

Quizplus · Accepted Answer

The discount rate is the interest rate used by a lender to discount future cash flows, and is typically based on the risk associated with the investment. In this case, the loan amount is $100,000 and the total payments over the life of the loan are $126,521. The total interest paid on the loan is $26,521. Using a financial calculator, the discount rate is approximately 10%. Therefore, the best answer is B, 10%.

What Is the Discount Rate Implicit in the Amortization Schedule