# 5 & 6 please! :)

liscount on discount on ve rate of St ive rate of st ve rate on inted loan ve rate on anted loan vs. LIBOR n borrowing d. 3/10, net 180. 2. Regis Clothiers can borrow from its bank at 11 percent to take a cash discount. The terms of the cash discount are 2/15, net 60. Should the firm borrow the funds? 3. Simmons Corp. can borrow from its bank at 12 percent to take a cash discount The terms of the cash discount are 1.5/10, net 60. Should the firm borrow the funds? 4. Your bank will lend you $2,000 for 45 days at a cost of $25 interest. What is your effective rate of interest? 5. A pawn shop will lend $100 for 10 days at a cost of $5 interest. What is the effective rate of interest? 6. Sol Pine is going to borrow $3,000 for one year at 8 percent interest. What is the effective rate of interest if the loan is discounted? 7. Mary Ott is going to borrow $5,000 for 90 days and pay $140 interest. What is the effective rate of interest if the loan is discounted? 8. 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 (this amount must be added to the interest cost with LIBOR). Which loan has the lower effective interest cost? 9. Gulliver Travel Agencies thinks interest rates in Europe are low. The firm horrows