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Bank A offers the following terms for a $18 million loan: interest rate: 6 percent for one year on funds borrowed fees: 0.3 percent of
Bank A offers the following terms for a $18 million loan: interest rate: 6 percent for one year on funds borrowed fees: 0.3 percent of the unused balance for the unused term of the loan Bank B offers the following terms for a $18 million loan: interest rate: 6.2 percent for one year on funds borrowed fees: 1.0 percent origination fee Assume that the interest on the loan is paid at maturity. Round your answers to two decimal places. a. Which terms are better if the firm intends to borrow the $18 million for the entire year? Cost of Bank A's loan: % Cost of Bank B's loan: -Select- terms are better. b. If the firm plans to use the funds for only six months, which terms are better based on the simple interest rates? Cost of Bank A's loan: % Cost of Bank B's loan: % -Select- terms are better. %
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