APR Discount Method

interest = p(r)(t)

amount received = p - interest

Where:
p = principle (amount of loan)
r = interest rate of loan (in decimal form)
t = amount of time for loan (in years)

APR    The annual percentage rate (APR) of a loan tells you what percent of the total amount of money you pay for the loan goes toward finance charges.

This calculator gives the annual percentage rate of a single-payment loan (a loan that is paid in one lump sum on a specified date) that is paid using the discount method.

In the discount method, the borrower prepays the finance charges (in this case, interest counts as finance charges.) The APR for this method is always higher than that of the Simple Interest Method because interest is calculated from the amount of money due after finance charges are paid (referred to as "amount received" in the last equation above.)

Note: Average Annual Finance Charge (AAF) is the average amount of interest paid each year for a loan.