The Meyer Company must arrange financing for its working capital requirements for the coming year. Meyer can (a) borrow from its bank on a simple interest basis (interest payable at the end of the loan) for one year at a 12 percent simple rate; (b) borrow on a three-month renewable loan at an 11.5 percent simple rate; (c) borrow on an installment loan basis at a 6.0 percent add-on rate with 12 end-of-month payments; or (d) obtain the needed funds by no longer taking discounts and thus increasing its accounts payable. Meyer buys on terms of 1/15, net 60. What is the EAR of the least expensive type of credit, assuming 360 days per year?
Paper#8592 | Written in 18-Jul-2015Price : $25