Which of the following one-year, $1000 bank loans offers the lowest effective annual rate? a. A loan

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Which of the following one-year, $1000 bank loans offers the lowest effective annual rate?

a. A loan with an APR of 6%, compounded monthly

b. A loan with an APR of 6%, compounded annually, with a compensating balance requirement of 10% (on which no interest is paid)

c. A loan with an APR of 6%, compounded annually, with a 1% loan origination fee

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Fundamentals of Corporate Finance

ISBN: 978-0132148238

2nd edition

Authors: Berk, DeMarzo, Harford

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Question Posted: Jan 14, 2012 02:17 AM

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Which of the following one-year, $1000 bank loans offers the lowest effective annual rate? a. A loan

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Plan Calculate the annual effective cost of each loan and select the loan with the lowest cost Exe...View the full answer

Fundamentals of Corporate Finance

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