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Nancy Lopez, Treasurer of National Mortuary Supply, has asked for your help in sourcing a one-year, $500,000 working capital loan. She has obtained the following

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Nancy Lopez, Treasurer of National Mortuary Supply, has asked for your help in sourcing a one-year, $500,000 working capital loan. She has obtained the following loan proposals from various banks and thrifts: The Third Federal Bank of Boston offers a simple interest loan at a stated annual interest rate of 14.97%. However, the bank requires a 6% compensating balance, and National Mortuary Supply does not have an account with this bank. Delaware Savings Bank is offering a discount interest loan at a stated annual interest rate of 2.5% over Delaware Savings prime, which Ms. Lopez determined to be 3 percent over the New York Prime Rate of 9%. The First Western Bank and Trust Company offered an installment loan at a stated annual interest rate of 7.95%. Interest is computed on the 3dd-on basis. Homeland Federal Savings offered a discount interest loan at a stated annual interest rate of 13% with a 5% compensating balance requirement. However, National Mortuary Supply maintains a savings account in this institution with an average balance of $6,250.00. The loan officer with the Third Federal Bank of Boston later called Ms. Lopez with what he described as a better offer to gain her business. He offered her a discount interest loan at a stated 13.20% interest rate with only a 4% compensating balance. Based upon the information given, what should Ms. Lopez do? Remember that she needs use of the full $500,000. HINT: This question requires you to evaluate options and make a recommendation. A full credit answer will properly analyze all of the options, present the best option, indicate why it was selected as the best option, and indicate any and all of the actions that would be required to accept the best option

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