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You approach two different banks for a loan of $300,000 to finance the purchase of this building. National Bank charges 7.3% APR compounded daily. United
You approach two different banks for a loan of $300,000 to finance the purchase of this building. National Bank charges 7.3% APR compounded daily. United Bank charges 7.5% APR compounded annually. Which bank should you use for the loan? If inflation is 3% annually, what is the real return the bank is earning on this loan? Explain the relationship between inflation, rates of return, and purchasing power.
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