Set Corporation is deciding which of two banks to borrow from on a 1-year basis. Bank A charges an 18 percent interest rate payable at maturity. Bank B charges a 17 percent interest rate on a discount basis. Which loan is cheaper and its effective interest rate? choose the letter of the correct answer a. Bank A with 18% b. Bank B with 18% c. Bank A with 20.5% d. Bank B with 20.5% e. Both banks with 20.5%
Set Corporation is deciding which of two banks to borrow from on a 1-year basis. Bank A charges an 18 percent interest rate payable at maturity. Bank B charges a 17 percent interest rate on a discount basis. Which loan is cheaper and its effective interest rate? choose the letter of the correct answer a. Bank A with 18% b. Bank B with 18% c. Bank A with 20.5% d. Bank B with 20.5% e. Both banks with 20.5%
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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Set Corporation is deciding which of two banks to borrow from on a 1-year basis. Bank A charges an 18 percent interest rate payable at maturity. Bank B charges a 17 percent interest rate on a discount basis. Which loan is cheaper and its effective interest rate?
choose the letter of the correct answer
a. Bank A with 18%
b. Bank B with 18%
c. Bank A with 20.5%
d. Bank B with 20.5%
e. Both banks with 20.5%
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