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    Corporate Finance and Variability in Short-Term Rates

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    When we look at the differences as to why short term loan rates may vary, we cannot overlook 'Discount Rate' loans. These loans require the payment of interest in advance.

    For these types of loans, would the interest rate be higher than if the interest was paid in arrears (at the end of the loan term)? Why?

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    A Discount Rate loan would have a higher effective interest rate than a standard interest paid in arrears loan. Assume a $100 loan. Under the discount rate loan, the ...

    Solution Summary

    The expert examines corporate finance and variability in short-term rates.