Question
YOUR Company has growth opportunities. The projects you are considering require additional funds. You have decided to use external financing to raise the additional capital.
YOUR Company has growth opportunities. The projects you are considering require additional funds. You have decided to use external financing to raise the additional capital. As Finance Manager, you approach three banks for a three-year P5,000,000 loan. All three banks quoted a rate of 12 percent per annum, payable in equal monthly installments. The interest calculations are as follows: Bank X flat basis Bank Y annual rest basis Bank Z reducing balance basis Compute the Effective Annual Rate for the three banks. Which bank would you choose? Explain.
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