Van Buren Resources Inc. is considering borrowing $120,000 for 189 days from its bank. Van Buren...
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Van Buren Resources Inc. is considering borrowing $120,000 for 189 days from its bank. Van Buren will pay $8,000 of interest at maturity, and it will repay the $120,000 of principal at maturity. Assume that there are 365 days per year. a. Calculate the loan's annual financing cost. Round your answer to two decimal places. 12.87 % b. Calculate the loan's annual percentage rate. Round your answer to two decimal places. % c. What is the reason for the difference in your answers to Parts a and b? The AFC does not consider compounding effects. Van Buren Resources Inc. is considering borrowing $120,000 for 189 days from its bank. Van Buren will pay $8,000 of interest at maturity, and it will repay the $120,000 of principal at maturity. Assume that there are 365 days per year. a. Calculate the loan's annual financing cost. Round your answer to two decimal places. 12.87 % b. Calculate the loan's annual percentage rate. Round your answer to two decimal places. % c. What is the reason for the difference in your answers to Parts a and b? The AFC does not consider compounding effects.
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