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Julie and Bill Stevens are purchasing a tractor and will need a $50,000 loan. The contractual rate is currently 7% with five equal annual payments.

Julie and Bill Stevens are purchasing a tractor and will need a $50,000 loan. The contractual rate is currently 7% with five equal annual payments. Their lender uses the add-on method of calculating interest. a. What are the annual payments? b. What is the effective interest rate of the loan? c. What is the effective interest rate if the lender uses the remaining balance method of calculating interest? Explain the difference from problem b.

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