The borrower will not receive the full amount of a loan when the ____ method is used to calculate interest.

Question

Quizplus · Accepted Answer

With the discount method, the borrower receives the proceeds of the loan net of the interest that has been deducted upfront, resulting in a lower amount than the face value of the loan. In contrast, with the add-on and simple-interest methods, interest is added to the loan amount, while with the amortization method, interest is paid in addition to a portion of the principal each payment period.

The Borrower Will Not Receive the Full Amount of a Loan