Cost of Bank Loans Del Hawley, owner of Hawley's Hardware, is negotiating with First City Bank for a 1-year loan of $65,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual nterest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places. a. A 14% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. 14 b. A 10% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year. 12.5 c. An 8% annual rate on a discounted loan, with a 15% compensating balance. 9.41 % 9.38 % d. Interest figured as 9% of the $65,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year. Alternative A V % % Which alternative has the lowest effective annual interest rate?

Cost of Bank Loans Del Hawley, owner of Hawley's Hardware, is negotiating with First City Bank for a 1-year loan of $65,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual nterest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places. a. A 14% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. 14 b. A 10% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year. 12.5 c. An 8% annual rate on a discounted loan, with a 15% compensating balance. 9.41 % 9.38 % d. Interest figured as 9% of the $65,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year. Alternative A V % % Which alternative has the lowest effective annual interest rate?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...

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