John Savage has obtained a short term loan from first Carolina bank. The loan matures in 180 days it is in the amount of $50,000. John needs the money to cover start up in a new business. He hopes to have sufficient backing from other investors by the end of the next six months. First Carolina bank offers John to financing options for the 50,000 loan: A fixed rate loan at 2.7% above the primary rate, or A variable rate loan at 1.1% above prime.

currently the prime rate of interest 6.7%, and the consensus interest rate forecast of a group of economists is as follows: 60 days from today the prime rate will rise by .6%; 90 days from today the prime rate will rise another .9%; 180 days from today the prime rate will drop by .5%. Using the forecast prime rate changes answer the following questions assume a 365 day year

b. calculate the total interest cost over 180 days for a variable rate loan

c. which is the lower interest cost phone for the next 180 days