Macco Bakers requires $500,000 in financing for a 90-day period. Three alternatives are being considered.

a. Establish a line of credit with the bank at an interest rate of 8 percent. The bank will charge a fee of $5,000 to establish the line of credit.

b. Forgo trade discounts from suppliers on terms of 2/10, net 100.

c. Issue commercial paper for 90 days at a discount of 2.05 percent.

1.. What would be the rate of interest for bank loan? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Rate of Interest for bank loan %

2.. What would be the cost of forgoing the cash discount? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Cost of forgoing the cash discount %

3.. What would be the price of commercial paper? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.) Discounted commercial paper %

4. Which alternative should be selected? Bank loan, Cost of forgoing discount, Commerical paper