January	$8,700	April	$8,700
February	2,700	May	9,700
March	3,700	June	4,700

Short-term financing will be utilized for the next six months. Projected annual interest rates are:

January	6.0%	April	13.0%
February	7.0%	May	12.0%
March	10.0%	June	12.0%

a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12. (Round intermediate calculations and final answers to 2 decimal places.)

ANSWER: Total dollar interest payments $

b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six months. Assume a long-term rate is locked in on an interest-only loan.

ANSWER: Total dollar interest payments $

b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller?

ANSWER:

Smaller

Larger