Unsecured sources of short-term loansPersonal Finance ProblemJohn Savage has obtained a short-term loan from First Carolina Bank. The loan matures in 180 days and is in the amount of $43,000. 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 $43,000 loan: a fixed-rate loan at 2.7% above the prime rate, or a variable-rate loan at 1.3% above prime.Currently, the prime rate of interest is 6.7%, and the consensus interest rate forecast of a group of economists is as follows: 60 days from today the prime rate will rise by 0.6%; 90 days from today the prime rate will rise another 1.2%; 180 days from today the prime rate will drop by 0.6%. 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?

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a.- If the fixed-rate loan costs 2.7% above the prime rate, the interest cost for the fixed-rate loan over 180 days is _______(Round to the nearest cent.)

Part 2

b. If the variable-rate loan costs 1.3% above the prime rate, for the first 60 days, the interest cost for the variable rate loan is __________

Part 3

If 60 days from today the prime rate will rise by 0.6% to 7.3%, for the next 30 days, the interest cost for the variable-rate loan is ________

Part 4

If 90 days from today the prime rate will rise another 1.2% to 8.5%, for the final 90 days, the interest cost for the variable-rate loan is _____________

Part 5

The total interest paid over 180 days for the variable-rate loan is __________

Part 6

c.Which is the lower-interest-cost loan for the next 180 days?

The lower-interest-cost loan is the _____ ( a). variable-rate /. b). fixed-rate ) loan.