Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 124

In the case of such loans, interest is first computed on the entire loan amount. It is then deducted from the principal, and the balance is lent to the borrower, who has to repay the entire principal at maturity. Such loans are usually repaid in a single installment. Let us take the example of Michael.

The interest for the loan amount of $8,000 is $800. So the lender will give him $7,200 and ask him to repay $8,000 after a year. The effective rate of interest is: