Consider two loans with a 1-year maturity and identical face
values: a(n) 7.8 % loan with a 0.99% loan origination fee and a(n)
7.8% loan with a 5.1% (no-interest) compensating balance
requirement. Which loan would have the higher effective annual rate
(EAR)? Why?
The EAR in the first case is ____%.
(Round to one decimal place.)
The EAR in the second case is ____%.
(Round to one decimal place.)
Which loan would cost the most? ______.
The EAR in the first case is ____%.
(Round to one decimal place.)
The EAR in the second case is ____%.
(Round to one decimal place.)
Which loan would cost the most? ______.
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