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ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required

ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required compensating balance of P700,000.

1. How much is the simple effective annual interest of the loan?

2. Should ABC accept this loan if another loan has similar terms but has a simple effective cost of 11%?

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