Question
Accounts receivable as collateral, cost of borrowingMaximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200000
Accounts receivable as collateral, cost of borrowingMaximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200000 that it will accept as collateral. The bank's terms include a lending rate set at prime%+3 and a %2 commission charge. The prime rate currently is %9. a.The bank will adjust the accounts by %10 for returns and allowances. It then will lend up to %85 of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software?
b.What is Scientific Software's effective annual rate of interest if it borrows $150000 for 12 months? For 6 months? For 3 months?(Note:Assume a 365-day year and a prime rate that remains at %9 during the life of the loan.)
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