3. XYZ Company is in need of short-term funds amounting to P600,000 to cover its operating...

 

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3. XYZ Company is in need of short-term funds amounting to P600,000 to cover its operating requirements for one year or less. Two bank are willing to provide the much-needed funds with different terms as follows: Bank 1: Term is 120 days at 15% simple interest. Bank 2: Term is 60 days at 14.5 % simple interest. Compute the following: a. b. Effective cost of borrowing of each bank. Which ter more favorable as a source of funds? Discuss your answer briefly. 3. XYZ Company is in need of short-term funds amounting to P600,000 to cover its operating requirements for one year or less. Two bank are willing to provide the much-needed funds with different terms as follows: Bank 1: Term is 120 days at 15% simple interest. Bank 2: Term is 60 days at 14.5 % simple interest. Compute the following: a. b. Effective cost of borrowing of each bank. Which ter more favorable as a source of funds? Discuss your answer briefly.

Answer rating: 100% (QA)

To compute the effective cost of borrowing for each bank we can use the formula for simple interest ... View the full answer