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What is the effective interest cost of this loan

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A firm receives a $1 million, 5-year loan at a 10 percent interest rate. The loan requires annual payments of $125,000 per year (at the end of each year) for years 1 to 4.

a. What payment is required at the end of year 5?

b. What would you call this type of loan?

c. How does it differ from the loan in problem 11?

d. What is the effective interest cost of this loan?

Reference no: EM131122100

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