Clancy and Smith Corp. needs to take out a one year bank loan of $600,000 and has been offered loan terms by two different banks. One bank has offered a simple interest loan of 10% that requires monthly payments. The loan principal will be paid back at the end of the year Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments. Based on a 360 day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.) Simple interest monthly payment Add on interest monthly payment Value Choose the answer that best evaluates the following statement: Fitcom Corp. needs to borrow $10,000,000. The company has been offered both simple interest and add-on interest loans. The add-on interest loan has a significantly lower interest rate than the simple interest loan

Clancy and Smith Corp. needs to take out a one year bank loan of $600,000 and has been offered loan terms by two different banks. One bank has offered a simple interest loan of 10% that requires monthly payments. The loan principal will be paid back at the end of the year Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments. Based on a 360 day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.) Simple interest monthly payment Add on interest monthly payment Value Choose the answer that best evaluates the following statement: Fitcom Corp. needs to borrow $10,000,000. The company has been offered both simple interest and add-on interest loans. The add-on interest loan has a significantly lower interest rate than the simple interest loan

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Concept explainers

Amortized Loans

The term "amortization" refers to spreading the value of a loan or a debt over a series of regular payments or installments comprising of both the principal and interest amount. It generally involves the process where in the value of a loan or an intangible asset is written down over its maturity period.

Question

z!]
Clancy and Smith Corp. needs to take out a one year bank loan of $600,000 and has been offered loan terms by two different banks
One bank has offered a simple interest loan of 10% that requires monthly payments. The loan principal will be paid back at the end of
the year Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments.
Based on a 360 day year, what will be the monthly payment for each loan for November? (Hint: Remember that November has 30 days.)
Simple interest monthly payment
Add on interest monthly payment
Value
Choose the answer that best evaluates the following statement:
Fitcom Corp. needs to borrow $10,000,000. The company has been offered both simple interest and add-on interest loans. The add-on interest loan
has a significantly lower interest rate than the simple interest loan
O The company needs to evaluate more factors than just the interest rate before deciding which type of loan it should accept
O The company should accept the add-on interest loan, because it will be paying less money in interest due to the lower interest rate

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