Evaluating alternative notes Evaluating Alternative NotesA borrower has two alternatives for a loan: (1) issue a $450,000, 60-day, 9% note or (2) issue a $450,000, 60-day note that the creditordiscounts at 9%. Assume a 360-day year.a. Compute the amount of the interest expense for each option.for each alternative.b. Determine the proceeds received by the borrower in each situation.(1) $450,000, 60-day, 9% simple-interest6,750 X(2) $450,000, 60-day note discounted at 9%C. Alternative 1 - V is more favorable to the borrower since the effective interest rate on alternative 1 is 9%- v and theeffective rate on alternative 2 is 9.14%FeedbackCheck My WorkA 360-day year is used when calculating interest on a note, Recall the definition of proceeds is the amount that the borrower receives in cash ormerchandiseConsider amount of money available for use. Consider the effective interest rate for each method.31%-4°F5:57 AM12/17/2021F9F12PrisoF10&4.6.7.8.YGKV.M

Since both discount and interest are calculated on face value the amount of interest or finance cost…

Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $450,000, 60-day, 9% note or (2) issue a $450,000, 60-day note that the creditor discounts at 9%. Assume a 360-day year. a. Compute the amount of the interest expense for each option. for each alternative. b. Determine the proceeds received by the borrower in each situation. (1) $450,000, 60-day, 9% simple-interest 6,750 X (2) $450,000, 60-day note discounted at 9% c. Alternative 1 - is more favorable to the borrower since the effective interest rate on alternative 1 is 9% and the effective rate on alternative 2 is 9.14% V. Feedback * Check My Work A 360-day year is used when calculating interest on a note. Recall the definition of proceeds is the amount that the borrower receives in cash or merchandise. Consider amount of money available for use. Consider the effective interest rate for each method. 5:57 AM 31% O -4°F 12/17/2021

Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $450,000, 60-day, 9% note or (2) issue a $450,000, 60-day note that the creditor discounts at 9%. Assume a 360-day year. a. Compute the amount of the interest expense for each option. for each alternative. b. Determine the proceeds received by the borrower in each situation. (1) $450,000, 60-day, 9% simple-interest 6,750 X (2) $450,000, 60-day note discounted at 9% c. Alternative 1 - is more favorable to the borrower since the effective interest rate on alternative 1 is 9% and the effective rate on alternative 2 is 9.14% V. Feedback * Check My Work A 360-day year is used when calculating interest on a note. Recall the definition of proceeds is the amount that the borrower receives in cash or merchandise. Consider amount of money available for use. Consider the effective interest rate for each method. 5:57 AM 31% O -4°F 12/17/2021

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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