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What is the effective annual rate on the cheaper loan

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Question - 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.

Required - What is the effective annual rate on the cheaper loan?

Reference no: EM133168455

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