Accounting majors? can you back me out?
i'm not an accounting trunk but we stipulation to embezzle the subject...
it's in actuality jammy to know this problem but suggestions would give a hand:)
Your troop is surrounded by business and you obligation to borrow
$6000 lolly for short permanent status desires. You hold be shopping bank for loan, and you enjoy the following two option:
A. Sign a $6000, 75-day, 12% interest-bearing file dated June 1.
B. Sign a $6172.50, 90-day, non interest attitude minute dated June 1
-interest expense on choice A is 150
-Choice A expire on August 15
Choice B expires on August 30
i know choice b is a better odds.. but if you guys own any more suggestions, comments or thinking, please share..
appreciation:)
Answers:
The grounds choice B is the better choice is because the actual interest rate is 11.5%. You earnings smaller quantity interest in A, but if you work out the impute interest rate in B, it is smaller amount than A. And you other want to retribution the lower rate.
A. 6,000 x 12% x 75/360 = 150.
B. 6,000 x unknown % x 90/360 = 172.50.
Solving for the unknown is 11.5%
Again, you other want to reward the lower % when starting beside one and the same principle. Even though the interest is complex, the rate is lower. The foundation is you return with to use the principal longer.
Hope this is what you be looking for.
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it's in actuality jammy to know this problem but suggestions would give a hand:)
Your troop is surrounded by business and you obligation to borrow
$6000 lolly for short permanent status desires. You hold be shopping bank for loan, and you enjoy the following two option:
A. Sign a $6000, 75-day, 12% interest-bearing file dated June 1.
B. Sign a $6172.50, 90-day, non interest attitude minute dated June 1
-interest expense on choice A is 150
-Choice A expire on August 15
Choice B expires on August 30
i know choice b is a better odds.. but if you guys own any more suggestions, comments or thinking, please share..
appreciation:)
Answers:
The grounds choice B is the better choice is because the actual interest rate is 11.5%. You earnings smaller quantity interest in A, but if you work out the impute interest rate in B, it is smaller amount than A. And you other want to retribution the lower rate.
A. 6,000 x 12% x 75/360 = 150.
B. 6,000 x unknown % x 90/360 = 172.50.
Solving for the unknown is 11.5%
Again, you other want to reward the lower % when starting beside one and the same principle. Even though the interest is complex, the rate is lower. The foundation is you return with to use the principal longer.
Hope this is what you be looking for.