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Evaluating Short-Term Loan Options
A student needs to borrow $400 for 14 days to purchase a required textbook before their student loan disbursement arrives. They are considering two options:
- Payday Lender: Offers a $400 loan for 14 days with a total finance charge of $60. The calculated Annual Percentage Rate (APR) for this loan is 391%.
- Credit Card Cash Advance: The student's credit card allows for a cash advance. The card has an APR of 24%.
Based on the goal of minimizing the cost of borrowing, analyze the two options. Which option is the most financially sound choice, and what specific piece of information is the most crucial for making this comparison?
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Social Science
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CORE Econ
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
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