Question: Consider two loans with a1-year maturity and identical facevalues: a(n) 7.9% loan with a 1.02% loan origination fee anda(n) 7.9% loan with a 5.4% (no-interest)

Consider two loans with a1-year maturity and identical facevalues: a(n) 7.9% loan with a 1.02% loan origination fee anda(n) 7.9% loan with a 5.4% (no-interest) compensating balance requirement. Which loan would have the higher effective annual rate (EAR)? Why?

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