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Accounts receivable as collateral, cost of borrowing Discount Bank has analyzed the accounts receivable of Maxtech, Inc. The bank has chosen eight accounts totaling $876,000

Accounts receivable as collateral, cost of borrowing Discount Bank has analyzed the accounts receivable of Maxtech, Inc. The bank has chosen eight accounts totaling $876,000 that it will accept as collateral. The banks terms include a lending rate set at prime plus 3.3% and a 1.5% commission charge. The prime rate currently is 4.5%. a. The bank will adjust the accounts by 15% for returns and allowances. It then will lend up to 75% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Maxtech? b. What is Maxtechs effective annual rate of interest if it borrows $500,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 4.5% during the life of the loan.)

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