Your firm is considering two one-year loan options for
a $500,000 loan. The first car-
ries fees of 2% of the loan amount and charges interest of 4% of
the loan amount.
The other carries fees of 1% of the loan amount and charges
interest of 4.5% of the
loan amount.
a. What is the net amount of funds from each loan?
b. Based on the net amount of funds, what is the true interest rate
of each loan?
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