A friend of Willie’s is a real estate developer and needs to borrow $75,000 to finish a development project. He is desparate for cash and offers Willie 18%, compounded monthly for 2 ½ years. Given that he can invest the money at a sure 5% with the bank, does this loan meet with Willie’s goals for low risk investment. Research some of the risks associated with this type of loan. Can you think of any ways to reduce the risk?
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