CFA Practice Question

There are 120 practice questions for this study session.

CFA Practice Question

What is the difference between interest being paid on a discount basis versus a collect basis?

A. Interest is deducted from a loan on a discount basis while interest is paid at maturity on a collect basis.
B. The present value of all interest payments are paid up front on a discount basis while the future value of all interest payments are paid at maturity on a collect basis.
C. The interest rate is below prime, or at a discount, when paid on a discount basis; the collect basis occurs when additional interest is charged for excessive loan risk and collected at the maturity of the loan.
Correct Answer: A

Interest is deducted from the loan on a discount basis while interest is paid at maturity on a collect basis.

User Contributed Comments 0

You need to log in first to add your comment.