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When Does an Agency Problem Occur

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Essay

When does an agency problem occur?


Definitions:

Extra Payments

Additional payments made over the required minimum payment on debts like loans or mortgages, aimed at reducing the principal balance more quickly.

Total Interest

The total amount of interest paid over the lifetime of a loan.

Life of the Loan

The duration over which a borrower is required to make payments until the loan is paid off in full.

Compounded Monthly

A process where interest earned is added to the principal, so that from that moment on, interest is earned on interest, recalculated on a monthly basis.

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