Harper Engine Company needs $684,000 to take a cash discount of 2.50/10, net 80. A banker will loan the money for 70 days at an interest cost of $15,400.

a.	What is the effective rate on the bank loan? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Effective rate of interest

%

b.	How much would it cost (in percentage terms) if Harper did not take the cash discount but paid the bill in 80 days instead of 10 days? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Cost of not taking a cash discount

%

c.

Should Harper borrow the money to take the discount?

	Yes
	No

d.	If another banker requires a 10 percent compensating balance, how much must Harper borrow to end up with $684,000? (Round your answer to 2 decimal places.)

Amount to be borrowed

$

e-1.	What would be the effective interest rate in part d if the interest charge for 70 days were $9,900? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Effective rate of interest

%

e-2.

Should Harper borrow with the 10 percent compensating balance requirement? (There are no funds to count against the compensating balance requirement.)

	Yes
	No