Bork Corporation wishes to borrow $100,000 for one year. It has the following alternatives available to it.

Question:

Bork wishes to borrow $100,000 for one year. It has the following alternatives available to it.
a. An 8 percent loan on a discount basis with 20 percent compensating balances required.
b. A 9 percent loan on a discount basis with 10 percent compensating balances required.
c. A 10.5 percent loan on a collect basis with no compensating balance requirement. Which alternative should the Bork choose if it is concerned with the effective interest rate?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...