At age 19, Anita Turner is in the middle of her second year of studies at a
Question:
a. North Carolina State Bank will lend $30,000 at 6 percent discount interest. The loan principal would be due at the end of two years.
b. National Bank of Chapel Hill will lend $25,000 under a two-year note. The note would carry a 7 percent simple interest rate and would also be due in a single payment at the end of two years.
Critical Thinking Questions
1. How much would Anita (a) receive in initial loan proceeds and (b) be required to repay at maturity under the North Carolina State Bank loan?
2. Compute (a) the finance charges and (b) the APR on the loan offered by North Carolina State Bank.
3. Compute (a) the finance charges and (b) the APR on the loan offered by the National Bank of Chapel Hill. How big a loan payment would be due at the end of two years?
4. Compare your findings in Questions 2 and 3, and recommend one of the loans to Anita. Explain your recommendation.
5. What other recommendations might you offer Anita regarding disposition of the loan proceeds?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...
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Related Book For
Personal Financial Planning
ISBN: 978-1305636613
14th edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk
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