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C. using an imputed interest rate to discount all future payments on the note.
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In note transactions, other factors involved in the exchange, such as the fair market value of the property, goods, or services, determine the effective or real interest rate. But, if a company cannot determine that fair value, and if the note has no ready market, determining the present value of the note is more difficult. To estimate the present value of a note under such circumstances, the company must approximate an applicable interest rate that may differ from the stated interest rate. This process of interest-rate
approximation is called imputation. The resulting interest rate is called an imputed interest rate.
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