Your company is considering three options for financing its short term operations Borrow Tk.20 million from Shuktara Bank at 12 percent interest rate and a 15 percent compensating balance requirement signing a 60 day promissory note. Borrow Tk.20 million from Chandramukhi Bank at 12 percent discount interest. Forego discount on a trade credit on terms 2/15, net 45. Strictly based on effective cost, which option would you select and why?
Your company is considering three options for financing its short term operations Borrow Tk.20 million from Shuktara Bank at 12 percent interest rate and a 15 percent compensating balance requirement signing a 60 day promissory note. Borrow Tk.20 million from Chandramukhi Bank at 12 percent discount interest. Forego discount on a trade credit on terms 2/15, net 45. Strictly based on effective cost, which option would you select and why?
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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Your company is considering three options for financing its short term operations
Borrow Tk.20 million from Shuktara Bank at 12 percent interest rate and a 15 percent compensating balance requirement signing a 60 day promissory note.
Borrow Tk.20 million from Chandramukhi Bank at 12 percent discount interest.
Forego discount on a trade credit on terms 2/15, net 45.
Strictly based on effective cost, which option would you select and why?
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