Question: What is the effective interest rate if the Banker\'s Discount on a loan of $2000 for 2 years at 5% is $200?

Options:

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

Correct Answer: 10%

Solution:

Effective Interest Rate = (Banker\'s Discount / Principal) / Time = (200 / 2000) / 2 = 10%.