Question: Dr. Ruth is going to borrow $5,000 to help write a book. The loan is for one year and the money can either be borrowed

Dr. Ruth is going to borrow $5,000 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 6 percent and LIBOR 1.5 percent less. Also assume there will be a $40 transaction fee with LIBOR, and that there are 360 days in the year. What loan has the lower annual interest cost?

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