Question
AAA supply is considering a 180 days short term borrowing of 100000 and is in the process of negotiating with two local banks. the prime
AAA supply is considering a 180 days short term borrowing of 100000 and is in the process of negotiating with two local banks. the prime rate is currently 8 percent. the terms follow.
bank a . a fixed rate over the 180 days at 2% above the prime rate.
bank b. offers a floating rate not over the 180 days period . initially the rate will be 8.5%for the first 90 days, the the rates drops to 8% for another 60 days , in the last 30 days the rate drops to 70%.
calculate the effective interest rate of bank a and bank b. Recommended which bank AAA should choose
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