**Educational Text on Loan Interest Calculations**---**Scenario Overview:**You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company is seeking to borrow $1,900,000 for a period of 90 days to purchase a large quantity of material at "closeout" prices. Various interest rates are under consideration from different banks. ---**Loan Interest Questions:**(a) **Ordinary Interest Calculation:**- **Task:** Calculate the amount (in dollars) of interest on a loan with a 13% ordinary interest rate from Rimrock Bank.- **Formula:** Interest = Principal × Rate × Time- **Details:** Principal = $1,900,000, Rate = 13%, Time = (90/360) years(b) **Exact Interest Calculation from Southside National Bank:**- **Task:** Determine the interest amount if the loan is offered at 13% with exact interest from Southside National Bank.- **Details:** Time is calculated using the exact number of days in the year (365 days for non-leap years).- **Result:** The answer should be rounded to two decimal places.(c) **Rimrock Bank's Competitive Offer:**- **Task:** Calculate the interest amount if Rimrock Bank offers a 12.5% rate using ordinary interest.- **Details:** Principal = $1,900,000, Rate = 12.5%, Time = (90/360) years(d) **Challenge - Southside National’s Competitive Rate:**- **Task:** If Southside National wants to compete with Rimrock's last offer by charging $1,375 less interest, calculate the rate required (as a percentage). - **Details:** Round the answer to the nearest hundredths of a percent using exact interest.---This document helps illustrate the process of determining the most cost-effective borrowing option and understanding how different interest types affect the total cost of a loan.

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You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company needs to borrow $1,900,000 for 90 days in order to purchase a large quantity of material at "closeout" prices. The interest rate for such loans at your bank, Rimrock Bank, is 13% using ordinary interest. (a) What is the amount (in $) of interest on this loan? $ (b) After making a few "shopping" calls, you find that Southside National Bank will lend at 13% using exact interest. What is the amount (in $) of interest on this offer? (Round your answer to two decimal. places.) $ (c) So that it can keep your business, Rimrock Bank has offered a loan at 12.5% using ordinary interest. What is the amount (in $) of interest on this offer? $ (d) (Challenge) If Southside National wants to compete with Rimrock's last offer (part c) by charging $1,375 less interest, what rate (as a %), rounded to the nearest hundredths of a percent, must it quote.

You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company needs to borrow $1,900,000 for 90 days in order to purchase a large quantity of material at "closeout" prices. The interest rate for such loans at your bank, Rimrock Bank, is 13% using ordinary interest. (a) What is the amount (in $) of interest on this loan? $ (b) After making a few "shopping" calls, you find that Southside National Bank will lend at 13% using exact interest. What is the amount (in $) of interest on this offer? (Round your answer to two decimal. places.) $ (c) So that it can keep your business, Rimrock Bank has offered a loan at 12.5% using ordinary interest. What is the amount (in $) of interest on this offer? $ (d) (Challenge) If Southside National wants to compete with Rimrock's last offer (part c) by charging $1,375 less interest, what rate (as a %), rounded to the nearest hundredths of a percent, must it quote.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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**Educational Text on Loan Interest Calculations**

---

**Scenario Overview:**

You are the accounting manager for Kool Ragz, Inc., a manufacturer of men's and women's clothing. The company is seeking to borrow $1,900,000 for a period of 90 days to purchase a large quantity of material at "closeout" prices. Various interest rates are under consideration from different banks.

---

**Loan Interest Questions:**

(a) **Ordinary Interest Calculation:**

- **Task:** Calculate the amount (in dollars) of interest on a loan with a 13% ordinary interest rate from Rimrock Bank.
- **Formula:** Interest = Principal × Rate × Time
- **Details:** Principal = $1,900,000, Rate = 13%, Time = (90/360) years

(b) **Exact Interest Calculation from Southside National Bank:**

- **Task:** Determine the interest amount if the loan is offered at 13% with exact interest from Southside National Bank.
- **Details:** Time is calculated using the exact number of days in the year (365 days for non-leap years).
- **Result:** The answer should be rounded to two decimal places.

(c) **Rimrock Bank's Competitive Offer:**

- **Task:** Calculate the interest amount if Rimrock Bank offers a 12.5% rate using ordinary interest.
- **Details:** Principal = $1,900,000, Rate = 12.5%, Time = (90/360) years

(d) **Challenge - Southside National’s Competitive Rate:**

- **Task:** If Southside National wants to compete with Rimrock's last offer by charging $1,375 less interest, calculate the rate required (as a percentage).
- **Details:** Round the answer to the nearest hundredths of a percent using exact interest.

---

This document helps illustrate the process of determining the most cost-effective borrowing option and understanding how different interest types affect the total cost of a loan.

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