# Question

Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows:

Short-term financing will be utilized for the next six months. Projected annual interest rates are:

a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12. Then, multiply this value times the monthly balance. To get your answer, sum up the monthly interest payments.

b. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller? Compute the interest owed over the six months and compare your answer to that in parta.

Short-term financing will be utilized for the next six months. Projected annual interest rates are:

a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12. Then, multiply this value times the monthly balance. To get your answer, sum up the monthly interest payments.

b. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller? Compute the interest owed over the six months and compare your answer to that in parta.

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