Question: What is the effective interest rate if the Banker\'s Discount on a loan of $2000 for 1 year at 5% is $100?

Options:

1. 5%
2. 10%
3. 15%
4. 20%

Correct Answer: 5%

Solution:

Effective Interest Rate = (Banker\'s Discount / Principal) × 100 = (100 / 2000) × 100 = 5%.