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What is the EAR of the lower-cost loan

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Problem - PDQ Enterprise can borrow from its bank using a one-year (a) simple interest loan with a 12 percent quoted rate and no compensating balance or (b) a discount interest loan with a quoted rate equal to 10 percent that requires a 15 percent compensating balance. What is the EAR of the lower-cost loan? PDQ normally tries to keep its checking account balance close to $0.

Reference no: EM132698841

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