Consider ethics when computing interest rates.

Step 1

Max Powers, Vice President for National Lending, has instructed the computer programmer to use a 365-day year to calculateinterest expense on thecompany's liabilities, which are loansthey havetaken out.Hehasalso instructed the programmer to use a 360-day year to calculateinterest revenue on assets, which are the loans they have given out to clients.

Step 2

Respond to the following questions

• What are the financial ramifications of using a 365-day year opposed to a 360-day year on both the interest expense and interest revenue?
• Which method should be used? Can both methods be used?
• Mention whether Maxis behaving in a professional manner.
• Is there amethod thatbanks normally use on loans?