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Consider a loan of $6,100 to be repaid after 7 years. The lender requires an eective annual interest rate of 3.3% assuming no defaults and

Consider a loan of $6,100 to be repaid after 7 years. The lender requires an eective annual interest rate of 3.3% assuming no defaults and an eective annual interest rate of 3.69% if it is expected that N out of every 500 borrowers will default but with a 26% partial recovery rate. Compute N.

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