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A Bank Loan Has a Quoted Annual Rate of 6

question 98

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A bank loan has a quoted annual rate of 6%.However,the borrower must maintain a balance of 25% of the amount of the loan,and the balance does not earn any interest.
a.What is the effective rate of interest if the loan is for 1 year and is paid off in one payment at the end of the year?
b.What is the effective rate of interest if the loan is for 1 month?


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