Whether Person X must borrow on credit line or he should accept the offer from Company FP. Introduction: The maximum amount of loan a bank can avail to the customers is termed as line of credit.

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Answer 1

Question

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

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Answer 2

Question

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

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Answer 3

Question

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

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Answer 4

Question

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

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Answer 5

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

Answer 6

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

Answer 7

Chapter 16, Problem 1OR

Summary Introduction

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Answer 8

Expert Solution & Answer

Explanation of Solution

When Company FP pays Person X $150,000 in cash then he has to pay then with interest of $155,000. The interest rate will be ($5,000$150,000×100=3.33%) . The interest rate for 60 days will be (0.0333×(36560)=20.3%) .

Thus, the bank credit line seems to be a better deal. If Company FP has no other recourse or option to Person X’s firm, then the adviser must make the choices because the bank credit is based on the creditability of the firm. Thus pledging will be risker under this case. So here he can opt for the Company FP.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 16.1 - What are the two major sources of spontaneous...Ch. 16.1 - Prob. 16.2RQ Ch. 16.1 - Prob. 16.3RQ Ch. 16.2 - How is the prime rate of interest relevant to the...Ch. 16.2 - How does the effective annual rate differ between...Ch. 16.2 - What are the basic terms and characteristics of a...Ch. 16.2 - What is a line of credit? Describe each of the...Ch. 16.2 - What is a revolving credit agreement? How does...Ch. 16.2 - Prob. 16.9RQ Ch. 16.3 - Prob. 16.10RQ

Whether Person X must borrow on credit line or he should accept the offer from Company FP. Introduction: The maximum amount of loan a bank can avail to the customers is termed as line of credit.

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP. Introduction: The maximum amount of loan a bank can avail to the customers is termed as line of credit.

Explanation of Solution

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Chapter 16 Solutions

To discuss: Whether Person X must borrow on credit line or he should accept the offer from Company FP.

Introduction:

The maximum amount of loan a bank can avail to the customers is termed as line of credit.