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Chapter 27, Problem 9P

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

  1. a. A loan with an APR of 6%, compounded monthly
  2. b. A loan with an APR of 6%, compounded annually, that also has a compensating balance requirement of 10% (on which no interest is paid)
  3. c. A loan with an APR of 6%, compounded annually, that has a 1% loan origination fee
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