Evaluating alternative notes

A borrower has two alternatives for a loan: (1) issue a $180,000, 45-day, 4% note or (2) issue a $180,000, 45-day note that the creditor discounts at 4%. Assume a 360-day year. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

1. Calculate the amount of the interest expense for each option. Round your answer to the nearest dollar.

   $ for each alternative.

2. Determine the proceeds received by the borrower in each alternative. Round your answers to the nearest dollar.

   (1) $180,000, 45-day, 4% interest-bearing note: $

   (2) $180,000, 45-day note discounted at 4%: $

3. Alternative 1 is more favorable to the borrower because the borrower receives more cash .