Question: Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $360,000, 90-day, 7% note or (2) issue a $360,000, 90-day note

Evaluating Alternative Notes

A borrower has two alternatives for a loan: (1) issue a $360,000, 90-day, 7% note or (2) issue a $360,000, 90-day note that the creditor discounts at 7%. Assume a 360-day year.

Evaluating Alternative Notes A borrower has two alternatives for a loan: (1)

Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $360,000, 90-day, 7% note or 2) issue a $360,000, 90-day note that the creditor discounts at 7%. 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) $360,000, 90-day, 796 interest-bearing note (2) $360,000, 90-day note discounted at 7% C. Alternative is more favorable to the borrower because the borrower

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