which bank to choose for loan

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asked Jan 15, 2017 in General by saarahaahmed (17 points) 87 views

1 Answer

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answered Jan 23, 2017 by jbsclasses (3,971 points)
how did you get the value 0.95 for bank X?
Since the party has to keep 5% of the loan amount as demand deposit with the bank, for all practical purposes, the party is utilising only 95% of the loan amount.  So to calculate effective interest rate, 95% of the loan amount has been used.

thank you vey much smiley