The Somerset Bank offered Blakemore Inc.the following loan alternatives in response to its request for a $75,000, 1-year loan.
Alternative 1: 7 percent discount interest, with a 10 percent compensating balance.
Alternative 2: 8 percent simple interest, with interest paid monthly.
What is the effective annual rate on the cheaper loan?
A) 8.00%
B) 7.23%
C) 7.67%
D) 8.43%
E) 8.30%
Correct Answer:
Verified
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