Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Short - term financing through bank loans Consider this case: Uninode Inc. needs to take out a one - year bank loan of $ 4
Shortterm financing through bank loans
Consider this case:
Uninode Inc. needs to take out a oneyear bank loan of $ and has been offered loan terms by two different banks. One bank has offered a simple interest loan of that requires monthly payments. The loan principal will be paid back at the end of the year.
Another bank has offered addon interest to be repaid in equal monthly installments.
Based on a day year, what will be the monthly payment for each loan for November? Hint: Remember that November has days.
Value
Simple interest monthly payment
Addon interest monthly payment
Choose the answer that best evaluates the following statement:
A bank loan officer has been approached by a startup company that needs a fiveyear loan to purchase the equipment for its first project. The project will have a life of five years. At the end of five years, the equipment will be worthless. The founders of the company told the loan officer that they would be willing to pay a much higher interest rate on a simple interest loan rather than contracting to an addon interest loan.
The loan officer should offer the company an addon interest loan because there is a high risk that the company will not be able to repay the principal on the loan at the end of the project's life.
The loan officer should offer the company a simple interest loan. The bank will make more money in the long run, because it can charge a much higher interest rate.
Continue without saving
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started