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1. The company needs a loan of $25,000 to purchase a new car. It applies and obtains a discount loan with a 7% discount rate

1. The company needs a loan of $25,000 to purchase a new car. It applies and obtains a discount loan with a 7% discount rate payable at the end of the year from Big Bank.

a. What is the size of the loan the car rental company needs from the bank to cover both loan and interest?

b. What is the loans effective interest rate?

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