Question
Lucy Love, owner of Loves Laundry, is negotiating with Arizona Credit Union (ACU) for a 1-year loan of $30,000. ACU has offered Love the alternatives
Lucy Love, owner of Loves Laundry, is negotiating with Arizona Credit Union (ACU) for a 1-year loan of $30,000. ACU has offered Love the alternatives listed below. Calculate the effective annual interest rate for each alternative. You must show calculations to receive full credit.
a. A 4.00% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. (0.5pts)
b. A 6.00% annual rate on a simple interest loan, with a 15% compensating balance required and interest due at the end of the year. (1pt)
c. An 7.50% annual rate on a discounted loan, with a 10% compensating balance. (1pt)
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