Why Is the Effective Rate of Interest Always Higher Than

question 92

Essay

Why is the effective rate of interest always higher than the interest rate of the loan on a discounted note?

---

Definitions:

Shocks

Unexpected or sudden events that disrupt or change the status quo, often necessitating swift adaptation or response.

Turnover

The rate at which employees leave a company and are replaced by new ones, affecting stability and continuity.

Dissatisfied

A feeling of unhappiness or disappointment resulting from unmet expectations or needs.

Withdrawal

The action of removing oneself from participation or engagement in a particular situation, activity, or group, often due to dissatisfaction or conflict.