Effective annual rates for Jasmine Scents
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Jasmine Scents has been given two competing offers for short term financing. Both offers are for borrowing $15000 for 1 year. The first offer is a discount loan at 8%, the second offer is for interest to be paid at maturity at a stated interest rate of 9%. Calculate the effective annual rates for each loan and indicate which loan offers the better terms.
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The solution explains how to determine the effective annual rates.
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In a discount loan the interest amount is deducted upfront. The interest amount is 15,000X8%=1,200. ...
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