Simple Simon's Bakery purchases supplies on terms of 1.7/10, net 25. If Simple Simon's chooses to take the discount offered, it must obtain a bank loan to meet its short-term financing needs. Alocal bank has quoted Simple Simon's owner an interest rate of 10.2% on borrowed funds. Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Hint: Use365 days for a year.)The cost of forgoing the discount is %. (Round to one decimal place.)Should Simple Simon's enter the loan agreement with the bank and begin taking the discount? (Select the best choice below.)A. Simple Simon's should enter into the loan agreement with the bank and begin taking the discount.B. Simple Simon's should not enter into the loan agreement but should begin taking the discount.C. Simple Simon's should enter into the loan agreement but not begin taking the discount.D. Need more information to answer the question.

The discount rate refers to the interest rate used to calculate the present value of the future…

Answered: Simple Simon's Bakery purchases…

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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Similar questions

Convert the credit card rate to the APR. (Round your answer to the nearest percent.) Nebraska, 0.04084% daily rate %?? Find the APR (rounded to the nearest tenth of a percent) for the loan described below. Purchase a living room set for $3,600 at11% add-on interest for 3 years. %? Find the APR (rounded to the nearest tenth of a percent) for the loan described below. Purchase a refrigerator for $1,500 at 13% add-on interest for 3 years. %? (a) Assume the car can be purchased for 0% down for 60 months (in lieu of rebate). A BMW that has a sticker price of $62,520 with factory and dealer rebates of $6,000 $? b) Find the monthly payment if financed at 2.5% add-on interest for 60 months. (Round your answer to the nearest cent.) $? c) Use the APR approximation formula to find the APR for part (b). (Round your answer to one decimal place.) %? (d) State whether the 0% APR or the 2.5% add-on rate should be preferred.
Ex/ A company sells $10,000 in merchandise to a buyer on finance.Another financial institution has offered to Buy thin loan discounted 4% per year, compounded quantely.How much does the company sell the loan for?
Zachary Porter of Abilene, Kansas, is contemplating borrowing $10,000 from his bank. The bank could use the add-on method to calculate different borrowing options. Calculate the finance charge and monthly payment for the following 7%, 4 Years: Finance Charge
Bank A offers you a loan at 5.76% compounded 2 times a year. Bank B offers to loan you the same amount at 0.10% less than the rate offered by Bank A but compounded twice as often as the Bank A rate is. Which bank's loan should you accept? As your answer, enter the effective rate (in percent, to two decimal places at least) offered by the bank whose loan you should accept.
Tuckahoe Hospital wishes to establish a line of credit with a bank. FIRST Bank terms call for a $500,000 maximum loan with an interest rate of 4% and a $2,000 fee. SECOND Bank terms call for a $500,000 maximum loan with an interest rate of 5% but no fee. The compensating balance requirement is 5% of the total line of credit for either bank. What is the effective interest rate for Tuckahoe Hospital from SECOND Bank if 50% of the total amount were used during the year?
Amir needs 12000 to get his business started as soon as possible. He decides to take a loan from a bank. If the amount of bank discount is 354.15, find the amount of the loan.
A company decides to obtain a small-business loan of $237,000. The financial institution from which the company borrows offers two options: a. Borrow $237,000 at 6% with monthly payments of $4,581.87 over 5 years. b. Borrow $237,000 at 7% with monthly payments of $2,751.77 over 10 years. Required: Record the issuance of an installment note payable under each option. Record the payments for the first and second month under each option. Determine the total amount of interest paid under each option over the full period of the note.
The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic Pumpkin's bank has offered to finance the purchase with an instalment loan, where $155 in interest will be repaid and payments on the loan must be made quarterly. What are the annual interest rates on these loans?
Ctenanthe Plant Co. borrows money to buy some new green houses. To do so, Ctenanthe borrows $750,000 in a 15-year fixed mortgage. To record the borrowing, Ctenanthe should. debit mortgage payable for $750,000 debit cash for $750,000 Ctenanthe dooes not need to record anything until the first payment is due, since thi is long-trm borrowing. credit cash for $750,000
The Fly-by-Night finance company advertises a “bargain 6%plan” for financing the purchase of automobiles. To the amount of the loan being financed, 6% is added for each year money is owed. This total is then divided by the number of months over which the payments are to be made, and the result is the amount of the monthly payments. For example, a woman purchases a $10,000 automobile under this plan and makes an initial cash payment of $2,500. She wishes to pay the $7,500 balance in 24 monthly payments: What effective annual rate of interest does she actually pay?
Tokyo Corporation must pay one of its suppliers P765,000. The bank requires a 15 percent compensating balance on loans to businesses. Due to the absence of funds at the lending bank, Tokyo Corporation must borrow enough to have P765,000.00 available to pay its suppliers after covering the compensating balance. How much must Splash Corporation borrow in order to pay its suppliers P765,000? In your calculations, assume that a year has 360 days. a. P900,000 b. P5,100,000 c. P573,750 d. P765,000 e. P879,750
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