Question
A borrower has two alternatives for a loan: (1) issue a $570,000, 75-day, 8% note or (2) issue a $570,000, 75-day note that the creditor
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A borrower has two alternatives for a loan: (1) issue a $570,000, 75-day, 8% note or (2) issue a $570,000, 75-day note that the creditor discounts at 8%. Assume a 360-day year. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
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Calculate the amount of the interest expense for each option. Round your answer to the nearest dollar.
$ for each alternative.
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Determine the proceeds received by the borrower in each alternative. Round your answers to the nearest dollar.
(1) $570,000, 75-day, 8% interest-bearing note: $
(2) $570,000, 75-day note discounted at 8%: $
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Alternative is more favorable to the borrower because the borrower .
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