Question: In the previous problem, what long-term interest rate would represent a break-even point between using short term financing as described in part a and long-term

In the previous problem, what long-term interest rate would represent a break-even point between using short term financing as described in part a and long-term financing? Divide the interest payments in Problem 8. a by the amount of total funds provided for the six months and multiply by 12.

Previous problem

Liz's Health Food Store has estimated monthly financing requirements for the next six months as follows:

January $8,000 April $8,000 ... February 2,000 May... 9,000 ... March.... 3,000 June .... 4,000

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

January 8.0% April 15.0% .. ... February 9.0% May... 12.0% March.. 12.0% June. 12.0%

January $8,000 April $8,000 ... February 2,000 May... 9,000 ... March.... 3,000 June .... 4,000

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