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The Luther Industries Wants to Borrow $1 Million for Two

Question 42

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The Luther Industries wants to borrow $1 million for two months. Using its inventory as collateral, it can obtain a 10% (APR) loan (compounded monthly). The lender requires that a warehouse arrangement be used. The warehouse fee is $10,000, payable at the end of the two months. Calculate the effective annual rate of this loan for Row Cannery.

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The monthly interest rate is blured image_TB2720_11 ...

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