Rapier Fencing requires $750,000 in financing for a 60day period. Three alternatives are being considered.

a. Establish a line of credit with the bank at an interest rate of 6 percent payable on a discounted basis.

b. Forgo trade discounts from suppliers on terms of 1.5/10, net 70.

c. Issue commercial paper for 60 days sold at a discounted price of 98.8 percent of maturity value.

a.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%

b.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%

c.What would be the cost 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%

d.Which alternative should be selected?

• Bank loan
• Cost of forgoing discount
• Commerical paper