Effective Cost of Short-Term Credit Yonge Corporation must arrange financing for its working capital requirements for th
Posted: Thu Apr 28, 2022 2:01 pm
Effective Cost of Short-Term Credit
Yonge Corporation must arrange financing for its working capital
requirements for the coming year. Yonge can: (a) borrow from its
bank on a simple interest basis (interest payable at the end of the
loan) for 1 year at a 12% nominal rate; (b) borrow on a 3-month,
but renewable, loan basis at a 10.9% nominal rate; (c) borrow on an
installment loan basis at a 5% add-on rate with 12 end-of-month
payments, assuming you borrowed $100; (d) obtain the needed funds
by no longer taking discounts and thus increasing its accounts
payable. Yonge buys on terms of 1/15, net 60. What is the effective
annual cost (not the nominal cost) of each type of
credit, assuming 360 days per year? Do not round intermediate
calculations. Round your answers to two decimal places.
Credit A: %
Credit B: %
Credit C: %
Credit D: %
What is the least expensive type of
credit?
-Select-Credit A - Credit B - Credit C - Credit D
Yonge Corporation must arrange financing for its working capital
requirements for the coming year. Yonge can: (a) borrow from its
bank on a simple interest basis (interest payable at the end of the
loan) for 1 year at a 12% nominal rate; (b) borrow on a 3-month,
but renewable, loan basis at a 10.9% nominal rate; (c) borrow on an
installment loan basis at a 5% add-on rate with 12 end-of-month
payments, assuming you borrowed $100; (d) obtain the needed funds
by no longer taking discounts and thus increasing its accounts
payable. Yonge buys on terms of 1/15, net 60. What is the effective
annual cost (not the nominal cost) of each type of
credit, assuming 360 days per year? Do not round intermediate
calculations. Round your answers to two decimal places.
Credit A: %
Credit B: %
Credit C: %
Credit D: %
What is the least expensive type of
credit?
-Select-Credit A - Credit B - Credit C - Credit D