Ronsons plc, the jewellery retailer, has a highly seasonal business with peaks in revenue in December and June. One of Ronsons' banks has offered the firm a £200,000 overdraft with interest charged at 10 per cent p.a. (APR) on the daily outstanding balance, with £3,000 payable as an arrangement fee. Another bank has offered a £200,000 loan with a fixed interest rate of 10 per cent p.a. (APR) and no arrangement fee. Any surplus cash can be deposited to earn 4% APR. The borrowing requirement for the forthcoming year is as follows:

Which offer should the firm accept?

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Month F M A M A S N D £000s 0 180 150 180 200 0 150 150 180 200 200 0