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According to the standard answer, the calculation is 100*(9/12)*(7.1-6.5)/100, I don’t undersand that why we use 7.1 here? Shouldn’t it be (6.85-6.5)/100? Help me please?
The company is borrowing money. When two interest rates are given, then the higher rate is the interest charged on borrowing and the lower rate is the interest given on deposits.
Given that they are borrowing, the answer is correct to use 7.1% and not 6.5%.I do actually explain this in my free lectures 🙂
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