Blue Begonia Ltd. is evaluating the following two independent short-term financing arrangements. What is the annual percentage cost for each financing alternative?

a. A 30-day loan secured against inventory from First Financial Co. with the following terms: (3 points)

1. • Inventory value equals $18 million
   • The financing company will lend up to 50% of the inventory value.
   • 0.20% processing fee (every 30 days) based on the total inventory value
   • Loan rate is 6% annually.
   • Calculate the effective annual interest rate.

b. Delay payments we make to our suppliers: (2 points)

• We currently have terms of 1/20 net 50 days and pay on the 20^th day.
• We now will pay on the 50^th day
• Calculate the effective annual interest rate.