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Thu 9 Jul, 2009 03:02 pm
Suppose i you borrow 1 dollar with 7% discount in the period of 1 day. This means i need to pay .07 dollar at the beginning of the day. This leaves me with .93 dollars at the beginning. i need to pay back 1 dollar at the end of the day.
We usually pay rent for a room at the beginning of the mouth. Why? Because for the use of the room for the mouth.
We pay money for the use of land, or food. This is no different than paying money for the use of money. We pay .07 dollars for the use of 1 dollar. The difference between discount and interest is that with the former, you pay at the beginning of the mouth, and the latter, you pay at the end of the mouth.