Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.
Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Outline of the case
Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her
business started to grow, she realized she would soon need to hire one or two people and that will
need money to pay for their compensation. In other words, she could not grow her business without
borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit
rating so most finance companies want to charge her a high-interest rate. She finally finds a lender
that will loan her the money at 12% compounded monthly.
Discussion Question:
1. How much interest will Jessica have to pay to the lender?
2. If you were Jessica, will you lend money at a higher interest rate? Why?
3. What other options are available and what should she do, aside from borrowing money.
4. Assume Hernandez has successfully managed her business for several years. List five
possible reasons she may still need to borrow from time to time.
Expert Solution

Step 1
As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts asked).
Request you to re-post the remaining question.
Data given:
Loan amount=$7600
Time=2 years
Rate=12% (compounded monthly)
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Solved in 3 steps

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