9. A farmer is buying a new tractor valued at $60,000. The deal will be financed...

 

Transcribed Image Text:

9. A farmer is buying a new tractor valued at $60,000. The deal will be financed by one of the following two methods. Compute the annual effective interest rate for each method. Which one is the most inexpensive? (18pts) a. The local office of the Farm Credit Systems will make a 5-year loan with equal annual payments of principal and interest at an 8% contractual interest rate with a $500 loan fee and a 12% stock requirement. b. The local bank will also make a 5-year loan with equal payments of principal and interest at a 10% contractual interest rate with a 5% compensating balance requirement. c. An online loan company offers a 5-year loan with equal payments of principal and interest with interest computed at 6% add-on. с. 9. A farmer is buying a new tractor valued at $60,000. The deal will be financed by one of the following two methods. Compute the annual effective interest rate for each method. Which one is the most inexpensive? (18pts) a. The local office of the Farm Credit Systems will make a 5-year loan with equal annual payments of principal and interest at an 8% contractual interest rate with a $500 loan fee and a 12% stock requirement. b. The local bank will also make a 5-year loan with equal payments of principal and interest at a 10% contractual interest rate with a 5% compensating balance requirement. c. An online loan company offers a 5-year loan with equal payments of principal and interest with interest computed at 6% add-on. с.