A simple discount note results in a higher interest rate (effective rate)than a simple interest note.

Question

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This is because a discount note has a lower total amount of interest paid, but it is calculated based on the face value of the note (the amount borrowed) rather than the amount actually received by the borrower. Therefore, the effective interest rate is higher because it is being calculated on a larger amount of money. In contrast, a simple interest note calculates interest only on the amount actually received by the borrower, resulting in a lower effective interest rate.

A Simple Discount Note Results in a Higher Interest Rate