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Posted on Oct 05, 2024

To pay for his last year of college, Josh would like to borrow $10 000 from a financial institution. The institution offers him two options.

Option A: a 1-year loan at an annual interest rate of 6.75%, compounded monthly

Option B: a 1-year loan at an annual interest rate of 7.00%, compounded quarterly

The loan must be paid in full at the end of the term.

a) Which loan should Josh accept? Explain.

b) What is the difference in interest between the two loans?

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