A borrower has two alternatives for a loan: (1) issue a $390,000, 120-day, 8% note or (2) issue a $390,000, 120-day note that the creditor discounts at 8%. Assume a 360-day year. a. Compute the amount of the interest expense for each option.fill in the blank 1 of 1$ for each alternative. b. Determine the proceeds received by the borrower in each situation. Line Item Description Amount (1) $390,000, 120-day, 8% interest-bearing note $fill in the blank 2 (2) $390,000, 120-day note discounted at 8% $fill in the blank 3
A borrower has two alternatives for a loan: (1) issue a $390,000, 120-day, 8% note or (2) issue a $390,000, 120-day note that the creditor discounts at 8%. Assume a 360-day year. a. Compute the amount of the interest expense for each option.fill in the blank 1 of 1$ for each alternative. b. Determine the proceeds received by the borrower in each situation. Line Item Description Amount (1) $390,000, 120-day, 8% interest-bearing note $fill in the blank 2 (2) $390,000, 120-day note discounted at 8% $fill in the blank 3
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A borrower has two alternatives for a loan: (1) issue a $390,000, 120-day, 8% note or (2) issue a $390,000, 120-day note that the creditor discounts at 8%. Assume a 360-day year.
a. Compute the amount of the interest expense for each option.
fill in the blank 1 of 1$ for each alternative.
b. Determine the proceeds received by the borrower in each situation.
| Line Item Description | Amount |
|---|---|
| (1) $390,000, 120-day, 8% interest-bearing note | $fill in the blank 2 |
| (2) $390,000, 120-day note discounted at 8% | $fill in the blank 3 |
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