In order to borrow $100,000 for a 10% loan on discount basis, the firm will actually have to borrow:

Question

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When a loan is issued on a discount basis, the interest is deducted from the principal amount at the beginning of the loan period. To receive $100,000 net, the firm must borrow an amount such that when 10% is deducted, $100,000 remains. If x is the amount borrowed, then x - 0.10x = $100,000, solving for x gives $111,111.

In Order to Borrow $100,000 for a 10% Loan on Discount