Chapter 8 focuses on Sources of Short Term Financing. Discuss the importance of understanding the difference of the Actual or Stated Interest Rate on a loan versus the Effective Rate. For example, in the textbook, a 1-year Installment Loan paid back over 12 monthly installments may have an interest rate of 6% and an Effective Rate of 11.08% (page 235, figure 8-6). Why is this so important to understand for the consumer and business borrower? Discuss the various other forms of financing you may use, term loans, lines of credit, compensating balances, accounts receivables, inventory. Which would you choose and why? Last, why would you take advantage of a Cash Discount (page 228). Tell me when you would borrow from a lender to take the discount.

Feel free to use your won real life examples.