Majestic Bank offers loans at various interest rates, depending on the nature of the loan....
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Majestic Bank offers loans at various interest rates, depending on the nature of the loan.
Hubert wants to borrow $20,000 for college tuition. He promises to make 5 payments to repay the loan in three years. Kate wants to borrow $20,000 for a new car. She promises to make 10 payments to pay back the loan in three years. Assume Hubert and Kate are equally creditworthy and that the size of their payments equals the time value of funds received by the bank.
If all else is constant, the bank would most likely charge a lower interest rate to
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