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Question: A borrows $20,000 for 8 years and repays the loan with level annual payments at the end of each year. B also borrows $20,000 for 8 years but pays only interest as it is due each year and plans to repay the entire loan at the end of the 8 year-period. Both loans carry an effective interest rate of 8.5%. How much more interest will B pay than A over the life of the loan?

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