finance

Question 1 (10 Marks) A company can borrow a discounted $12,500 loan for 6 months at 1.70% Required: What is the effective rate of interest (ER) on the loan? Use a 360-diy year calendar. (6 marks) ERI= Interest Days in Year (360) Principal Days Loan is Outstanding If the company secures the loan at the rate calculated in a, the borrowed money would be further invested in an asset that yields an effective 8% return, covering the same period. Determine whether this proposition results in net gain (or loss) for the firm (3 marks) e Alternatively, the firm can choose not to borrow and deposit its available funds in a savings account that pays an effective 2.50% rate, with the same maturity as that of the loan Compared to your assessment of the proposition outlined in b, is the firm better off with the savings account? (1 mark) Question 1 (10 Marks) A company can borrow a discounted $12,500 loan for 6 months at 1.70% Required: What is the effective rate of interest (ER) on the loan? Use a 360-diy year calendar. (6 marks) ERI= Interest Days in Year (360) Principal Days Loan is Outstanding If the company secures the loan at the rate calculated in a, the borrowed money would be further invested in an asset that yields an effective 8% return, covering the same period. Determine whether this proposition results in net gain (or loss) for the firm (3 marks) e Alternatively, the firm can choose not to borrow and deposit its available funds in a savings account that pays an effective 2.50% rate, with the same maturity as that of the loan Compared to your assessment of the proposition outlined in b, is the firm better off with the savings account? (1 mark)