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Del Hawley, owner of Hawley s Hardware, is negotiating with First City Bank for a 1 - year loan of $ 5 0 , 0
Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a year loan of $ First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places.
A annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year.
A annual rate on a simple interest loan, with a compensating balance required and interest due at the end of the year.
An annual rate on a discounted loan, with a compensating balance.
Interest figured as of the $ amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year.
Which alternative has the lowest effective annual interest rate?
ABC or D
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