Country Pumpkin General Store Co. owes $73,000 to one of its suppliers. The supplier has offered a trade discount of 1.5/10 net 50. Their bank, Big City Slicker Bank, will loan the funds for 40 days at an interest rate of 9.5% annually. (6 MARKS)

The cost of forgoing the discount is:

13.9%

14.6%

12.5%

11.7%

The annual interest rate if the bank loan is discounted is:

9.56%

11.2%

11.81%

14.62%

A competing bank, Awful Bank, will not discount the loan but requires a 15% compensating balance instead. If the stated rate of interest is 9.5%, The rate of interest charged by Awful Bank is:

11.18%

12.75%

9.56%

10.56%