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Q. 04: Consider two loans with a 1-year maturity and identical face values: a 7.6% loan with a 0.97% loan origination fee and a 7.6%

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Q. 04: Consider two loans with a 1-year maturity and identical face values: a 7.6% loan with a 0.97% loan origination fee and a 7.6% loan with a 4.7% (no-interest) compensating balance requirement. Which loan would have the higher effective annual rate? Why? Solution

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