A16. (use monthly compounding for the bank loan, and a 365-day year for the commercial paper) Cost of short-term funds- D.M Ferguson and Associates is considering the three alternative sources of short- term funds here. What is the cost of each source?

A.Skipping the discount on accounts payable, the terms of which are 1/10, net 30.

B.Borrowing from the bank at 10%, interest in arrears, with a 20% compensating balance requirement.

C.Selling 90-day commercial paper, with a discount rate of 13%.

A18. (use a 360-day year), Cost of commercial paper- The discount rate for a 54-day issue of commercial paper is 8.50%. What is the APR and APY?

A19 (use a 360-day year) Cost of commercial paper-Specific Motors Acceptance Corporation sells medium-term commercial paper with a 180-day maturity. If SMAC sells the commercial paper at a discount rate of 11%, calculate the APR and APY.

B4 (Cost of wire transfer versus paper check) If you send money to firm headquarters with a wire transfer, it costs a fixed $15 and there is no float. On the other hand, if you cut a check and mail it, the fixed cost if only a $1.50 and the transfer of funds will occur in five days (due to mail times, processing times and clearing times). The opportunity cost of funds is 8% per year.

A.What are the cost of a wire transfer and cost of a paper check if the amount being forwarded to headquarters is $10,000?

B.What are the cost of a wire transfer and cost of a paper check if the amount being forwarded to headquarters is $30,000?

What is the breakeven point between and wire transfer and a paper check?

B9 (Cost of installment loan) Barbara's Bank will give you an installment loan for $50,000 that will be repaid in 12 equal monthly installments. The loan is a 12% add-on loan, which means you must pay 12% on the original loan (not just the remaining balance). Your total payments will be $56,000 (the principal of $50,000 plus $6,000 of interest). So, your monthly payment is $4666.67. What APY are you paying on the loan?

B11 (Cost of bank loan) For a three- month loan of $100 with an APR interest rate of 15%, determine the cash flows and the APY for each of the following loans:

A.Interest in arrears

B.Discount loan

C.Interest in arrears with a 10% compensating balance

D.Discount loan in arrears with a 10% compensating balance