Determine the effective annual rate associated with loan

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Reference no: EM131907714

1. Cash discount versus loan. Joanne Germano works in an accounts payable department of a major retailer. She has attempted to convince her boss to take the discount on the 3/15 net 60 credit terms most suppliers? offer, but her boss argues that giving up the 3?% discount is less costly than a? short-term loan at 11?%. Prove to whoever is wrong that the other is correct.

?(?Note: Assume a? 365-day year.)

The cost of giving up the cash discount is ______% Round two decimal places

2. Effective annual rate. A financial institution made a ?$2,000,000?, ?1-year discount loan at 7?% ?interest, requiring a compensating balance equal to 6?% of the face value of the loan. Determine the effective annual rate associated with this loan.

?(?Note: Assume that the firm currently maintains? $0 on deposit in the financial? institution.)

The effective annual rate associated with the loan is _______%. Round to two decimal places.

Reference no: EM131907714

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