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Today, the prime rate is 6%. A borrower has obtained a 4-year loan at a premium of 3%. This is a fixed rate loan for
Today, the prime rate is 6%. A borrower has obtained a 4-year loan at a premium of 3%. This is a fixed rate loan for the first 3 years and thereafter, to be converted into a floating rate loan at the same premium for the last year. Immediately after the loan is taken, the prime rate reduces to 5% and remains at this rate for the next 4 years. Which of the following is TRUE?
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