Unsecured sources of short-term loans Personal Finance Problem John Savage has obtained a short-term loan from First Carolina Bank. The loan matures in 180 days and is in the amount of $47,000. John needs the money to cover start-up costs in a new business. He hopes to have sufficient backing from other investors by the end of the next 6 months. First Carolina Bank offers John two financing options for the $47,000 loan: a fixed-rate loan at 2.9% above the prime rate, or a variable-rate loan at 1.6% above prime Currently, the prime rate of interest is 6.8%, and the consensus interest rate forecast of a group of economists is as follows: 60 days from today the prime rate will rise by 0.5%; 90 days from today the prime rate will rise another 0.8%; 180 days from today the prime rate will drop by 0.3%. Using the forecast prime rate changes answer the following questions. Assume a 365-day year a. Calculate the total interest cost over 180 days for a fixed-rate loan b. Calculate the total interest cost over 180 days for a variable-rate loan c. Which is the lower-interest-cost loan for the next 180 days? a. If the fixed-rate loan costs 2.9% above the prime rate, the interest cost for the fixed-rate loan over 180 days is S (Round to the nearest cent.)