A borrower has two alternatives for a loan: (1) issue a $300,000, 120-day, 8% note or (2) issue a $300,000, 120-day note that the creditor discounts at 8%. Assume a 360-day year.

a. Calculate the amount of the interest expense for each option. $ for each alternative.

b. Determine the proceeds received by the borrower in each situation.

(1) $300,000, 120-day, 8% interest-bearing note	$
(2) $300,000, 120-day note discounted at 8%	$

c. Alternative is more favorable to the borrower because the borrower .