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Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $660,000, 90-day, 9% note or (2) issue a $660,000, 90-day note
Evaluating Alternative Notes
A borrower has two alternatives for a loan: (1) issue a $660,000, 90-day, 9% note or (2) issue a $660,000, 90-day note that the creditor discounts at 9%. Assume a 360-day year.
a. Calculate the amount of the interest expense for each option. $ for each alternative.
b. Determine the proceeds received by the borrower in each situation.
(1) $660,000, 90-day, 9% simple-interest | $ |
(2) $660,000, 90-day note discounted at 9% | $ |
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