Branson, Inc., has sold products to the Brandywine Company, a major customer, for $20,000. As a courtesy

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Question:

Branson, Inc., has sold products to the Brandywine Company, a major customer, for $20,000. As a courtesy to Brandywine, Branson has agreed to take a note due in two years for half of the amount due.

a. What is the effective price of the transaction to Branson if the interest rate is:
1. 6%
2. 8%
3. 10%
4. 12%

b. Under what conditions might the effective price be even less as viewed by Brandywine?