If you are a lender, which of the following type of loan is the most beneficial...

If you are a lender, which of the following type of loan is the most beneficial for you? In other words, which of the following type of loan makes you receive the highest amount of interest payments?

		Discount Loan
		Interest- Only Loan
		Amortized Loan
		None

Expert Solution

The correct answer is the interest only loan. Under this one, the entire principal is outstanding throughout the term and the interest acts on the entire outstanding. In the amortized loan, the principal gets amortized and hence the interest keeps reducing in every payment.

Between discount loan and interest only loan, usually, the interest ratye is lower in case of discount loan. Interest only loan has higher risk for the lender and hence carries higher interest rate. Because of this the total interest payment to th elender is highest in case of interest only loan.

jeff jeffy answered 2 years ago

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