Description of this paper

The Meyer Company must arrange financing for its w...

Description

Solution


Question

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-2015

Price : $25
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