Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $660,000, 120-day, 6% note or (2) issue a $660,000, 120-day note that the creditor discounts at 6%. Assume a 360-day year. a. Calculate the amount of the interest expense for each option. $fill in the blank 1 for each alternative. b. Determine the proceeds received by the borrower in each situation. (1) $660,000, 120-day, 6% interest-bearing note $fill in the blank 2 (2) $660,000, 120-day note discounted at 6% $fill in the blank 3 c. Alternative is more favorable to the borrower because the borrower .
Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $660,000, 120-day, 6% note or (2) issue a $660,000, 120-day note that the creditor discounts at 6%. Assume a 360-day year. a. Calculate the amount of the interest expense for each option. $fill in the blank 1 for each alternative. b. Determine the proceeds received by the borrower in each situation. (1) $660,000, 120-day, 6% interest-bearing note $fill in the blank 2 (2) $660,000, 120-day note discounted at 6% $fill in the blank 3 c. Alternative is more favorable to the borrower because the borrower .
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 5FPE
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Evaluating Alternative Notes
A borrower has two alternatives for a loan: (1) issue a $660,000, 120-day, 6% note or (2) issue a $660,000, 120-day note that the creditor discounts at 6%. Assume a 360-day year.
a. Calculate the amount of the interest expense for each option.
$fill in the blank 1 for each alternative.
b. Determine the proceeds received by the borrower in each situation.
(1) $660,000, 120-day, 6% interest-bearing note | $fill in the blank 2 |
(2) $660,000, 120-day note discounted at 6% | $fill in the blank 3 |
c. Alternative is more favorable to the borrower because the borrower .
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