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With all else equal (i.e. level of credit risk, history, etc) for an applicant, how would the manner of which interest is paid compare among short-term loans?

For example, if interest is to be paid in arrears (at end of term), how is this different from paying interest on a monthly basis?

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Solution Summary

The solution compares methods in which interest is paid on short term loans. How it is different from paying interest on a monthly basis is given.

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There are basically 3 ways in which interest is paid.

1) Paid at the end. In this case, you would receive your interest at the end of your loan

The formula for FV = PV(1+i)^n, where FV is the future value (what you have to pay back), PV is present value (what you get from the loan), i is interest rate per period and n is number ...

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