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The Worshire Company made a purchase from one of its supplier. Worshire received a bill of $125,000 from the supplier. The bill was payable within
The Worshire Company made a purchase from one of its supplier. Worshire received a bill of $125,000 from the supplier. The bill was payable within 35 days but the supplier offered Worshire a 3% discount if they paid within 10 days (i.e. 3/10, n35). Worshire does not have the money to pay early. However, Worshire can go to the Smooth River Bank and get a 25-day discount loan with a stated annual rate of interest of 16%. Worshire decided that they will borrow from the bank if the cost of the bank loan is less than the cost of the trade credit. What should Worshire do? Show your work! The Acer Company needs to have $12, 500 that they can use for the next 8 months. They go to the bank and ask about an 8-month loan. The hank offers Acer an 8-month loan with a stated annual rate of 16%. It is a discount loan and also requires a 15% compensating balance. In order to walk out of the bank with $12, 500 in hand how much should Acer borrow? The Fitzhugh Company needed to walk out of the bank with $92, 880 in cash. So they went into the bank and got a $129,000 loan with a 15% compensating balance. This was also a discount loan. The term of the loan was one year. So they were able to walk out of the bank with $92, 880 in hand. What was the stated rate of interest on this loan? What was the effective rate of interest on this loan? The ADM Computer Company. Inc. sold $5 million of commercial paper to the All Value Pension Fund. This commercial paper had a life of 200 days. ABM paid All Value $102, 731.25 of interest on this commercial paper. What annual rate of interest did the All value Pension Fund cam on this commercial paper? What was the effective annual rule of interest that ABM Computer paid on this commercial paper
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