Consider two loans with one-year maturities and identical face values: a 7.9% loan with a 1.02% loan
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Consider two loans with one-year maturities and identical face values: a 7.9% loan with a 1.02% loan origination fee and a 7.9% loan with a 4.7% (no-interest) compensating balance requirement. Which loan would have the higher effective annual rate? Why?
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To determine which loan has the higher effective annual rate we need to compare the total cost of borrowing for each loan taking into account the inte...View the full answer
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9781292437156
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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