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Suppose you are considering taking consumer loan from bank for one year. Usually, for short- term loans, the bank offers 8 percent interest that compounds
Suppose you are considering taking consumer loan from bank for one year. Usually, for short- term loans, the bank offers 8 percent interest that compounds annually. Your credit application has been viewed by a few banks and two of them replied; Bank ALFA offers you a loan at 8 percent annual rate-interest payment by the end of year, and Bank BETA offers a loan with the same annual interest rate, but interest payment is 2 percent by the end of each quarter. Which loan do you prefer? Why?
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