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ASSUME THAT YOU CAN BORROW $175,700 FOR ONE YEAR FROM A LOCAL COMMERCIAL BANK. A. THE BANK LOAN OFFICER OFFERS YOU THE LOAN IF YOU

ASSUME THAT YOU CAN BORROW $175,700 FOR ONE YEAR FROM A LOCAL COMMERCIAL BANK.

A. THE BANK LOAN OFFICER OFFERS YOU THE LOAN IF YOU AGREE TO PAY $16,500 IN INTEREST PLUS REPAY THE $175,000 AT THE END OF ONE YEAR. WHAT IS THE PERCENT INTEREST RATE OR EFFECTIVE COST?

B. AS AN ALTERNATIVE YOU COULD GET A ONE-YEAR DISCOUNT LOAN AT 9 PERCENT.

C. WHICH LOAN WOULD HAVE THE LOWER EFFECTIVE COST?

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