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Statement of a problem № m1380

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Your firm is considering the following three alternative bank loans for $1,000,000: a) 10% loan paid at year end with no compensating balance b) 9% loan paid at year end with a 20% compensating balance c) 6% loan that is discounted with a 20% compensating balance requirement Assume that you would normally not carry any bank balance that would meet the 20% compensating balance requirement. What is the rate of annual interest on each loan?




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