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You have the option of loaning money to one friend who promises to pay simple interest or to another friend who promises to pay the same APR but compound the interest. Which would you choose, and why?

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Answer:

I would loan my money to the one who pays the compound interest.

This is because more money would be generated from the compound interest as it is based on the principal (Amount loaned) and also the interest generated from the loan. Unlike simple interest that is only based on the principal.

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