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.

Question

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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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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.