$2$ Fin$401$

$($i$)$

Questio

$13$

Burt's Department Store needs $$652,000$ to take a cash discount of $\frac{2\mathrm{.}50}{10},$ net $70.$ A banker will loan the money for $60$ days at an interest cost of $$14,100.$

a$.$ What is the annual rate on the bank loan?

Note: Use $365$ days in a year. Do not round intermediate calculations. Round the final answer to $2$ decimal places.

Annual rate $\%$

$01$:$13$:$41$

b$.$ How much would it cost $($in percentage terms$)$ if Burt's did not take the cash discount and paid the bill in $70$ days instead of $10$ days? Note: Use $365$ days in a year. Do not round intermediate calculations. Round the final answer to $2$ decimal places.

Cost of not taking a cash discount $\%$

c$.$ Should Burt's borrow the money to take the discount?

Yes

No

d$.$ If the banker requires a $10$ percent compensating balance, how much must Burt's borrow to end, up with the $$652,000?$

Note: Round the final answer to the nearest whole dollar.

Amount to be borrowed $ $$

e$-1.$ What would be the interest rate in part $d$ if the interest charge for $60$ days were $$25,000?$ Note: Use $365$ days in a year. Do not round intermediate calculations. Round the final answer to $2$ decimal places.

Annual rate $\%$

e$-2.$ Should Burt's borrow with the $10$ percent compensating balance? $($There are no funds to count against the compensating balance requirement.$)$

Yes

No

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