1. CommentupontheKerrmemo.WhatareitsmajorpointsandhowmighttheseaffectDeal'sComputerland?Isthememoreflectiveofthemannerinwhichbankslendmoney?
2. AsameansofaddingtoDeal'sinformationinthismatter,calculatetheAPRforeachforthefollowingforthecompany's$150,000loan:
   • SimpleInterestat8percent.
     • Nocompensatingbalance
     • 10percentcompensatingbalance
   • Discountinterestat8percent
     • Nocompensatingbalance
     • 10percentcompensatingbalance

Which of the APR's might be most appropriate for Deal's? Explain your answer.

3. If banks are inesting an increasing amount of funds in the money market versus lending to business borrowers, ehat will this mean to Deal now and in the future?

4. Why does the bank require a period of no drawdown? Is this reasonable? Should Deal change banks because of this provision?

5. Why is Deal concerned about " over-reliance upon the firm's supplies?" Discuss the advantages and dis advantages of bank borrowing, given her attitude about the suppliers.

6. Refer to your answer to Question 2. Is Deal in a position to seek the lowest rate shown? Why or why not?

7.Generally, what causes banks to be "cautious lenders?"

8. What type of information, and in what format, will the bank likely want before it seriously considers a loan to Deal's Computerland?

9. Of what importance will trend data be to the bank in this decision? Which trends will offer the most useful information to the bank?

10. Describe, without the use of numbers, the difference between the nominal annual rate of interest and the effective annual cost of the loan.