Question
Use 4 decimal places to calculate the answers. Present your answers as xx.xx% for Question a. and b. BBB Supply is considering a 180-day short
Use 4 decimal places to calculate the answers. Present your answers as xx.xx% for Question a. and b. BBB Supply is considering a 180-day short term borrowing of $100,000 and is in the process of negotiating with two local banks. The prime rate is currently 8 percent. The terms follow: Bank A : a fixed rate over the 180 days at 2% above the prime rate Bank B: Offers a floating-rate note over the 180 days period. Initially, the rate will be 8.5% for the first 90 days, then the rate drops to 8% for another 60 days. In the last 30 days, the rate drops to 7%.
Calculate the effective interest rate of Bank A
Calculate the effective interest rate of Bank B
Recommend which bank BBB should choose.
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