Which loan is cheaper
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31. Your uncle Fred just purchased a new boat. He brags to you about the low 7% interest rate
(APR, monthly compounding) he obtained from the dealer. The rate is even lower than the rate he could have obtained on his home equity loan (8% APR, monthly compounding). If his tax rate is 25% and the interest on the home equity loan is tax deductible, which loan is truly cheaper?
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The solution explains how to determine which loan is cheaper
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We have to consider the after tax effective annual rate.
The effective annual rate for the ...
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