A farmer needs to borrow $50,000. The local PCA will make a four-year loan fully amortized at 12% with annual payments. A $100 loan fee and stock purchase is required. The borrower stock requirement is the lesser of $1,000 or 2% of loan principal. Assume that sufficient money is borrowed to cover the $50,000, the fee and the stock requirement. Also assume that the stock requirement is returned to borrower when the loan is paid off and the last debt payment can be reduced by the stock amount. How much money needs to be borrowed? What is the dollar amount of the stock requirement? What is the annual loan payment? What is the actuarial, annual percentage, and the effective interest rate? (AIR, APR, ie = 12.44%)

How much does the borrower need to borrow in order to cover money needed, stock and loan fee?

$16,824

$51,100

$1,000

$16,462

None of the above

How much stock does the farmer need to purchase?

$16,824

$51,100

$1,000

$16,462

None of the above

What is the annual loan payment?

$16,824

$51,100

$1,000

$16,462

None of the above

What is the actuarial rate?

12%

12.44%

3%

4%

None of the above

What is the effective rate?

12%

12.44%

3%

4%

None of the above