Question
Burt's Department Store needs $647,000 to take a cash discount of 2.50/15, net 120. A banker will loan the money for 105 days at an
Burt's Department Store needs $647,000 to take a cash discount of 2.50/15, net 120. A banker will loan the money for 105 days at an interest cost of $12,500.
a.What is the annual rate on the bank loan?(Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Annual rate%
b.How much would it cost (in percentage terms) if Burt's did not take the cash discount and paid the bill in 120 days instead of 15 days?(Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Cost of not taking a cash discount%
c.Should Burt's borrow the money to take the discount?
multiple choice 1
- Yes
- No
d.If the banker requires a 10 percent compensating balance, how much must Burt's borrow to end up with the $647,000?(Round the final answer to the nearest whole dollar.)
Amount to be borrowed$
e-1.What would be the interest rate in partdif the interest charge for 105 days were $22,750?(Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Annual rate%
e-2.Should Burt's borrow with the 10 percent compensating balance? (There are no funds to count against the compensating balance requirement.)
- Yes
- No
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