Question 01
Company A is currently cash-constrained, and must make a
decision about whether
to delay paying one of its suppliers, or taking out a loan. They
owe the supplier $14,261,
and they can borrow the money from Bank A, which has offered to
lend the firm $14,261 for 1 month(s) at
an APR (compounded) of 17%. The bank will require a (no-interest)
compensating balance of 7% of the face value of
the loan and will charge a $226 loan origination fee, which means
Hand-to-Mouth must borrow even more than the
$14,261?
NOTE: Answer in percentages. If your answer is 0.0204, you must
answer 2.04. Do not use the "%" sign.
Question 02
Company A is currently cash-constrained, and must make a
decision about whether
to delay paying one of its suppliers, or taking out a loan. They
owe the supplier
$12,703, and they can borrow the money from Bank B, which has
offered to lend the firm $12,703 for
1 months at an APR of 15% (compounded). The loan has a 2.77% loan
origination fee.
What would be the cost for Company A if they decide to borrow from
Bank B?
NOTE: Answer in percentages. If your answer is 0.0204, you must
answer 2.04. Do not use the "%" sign.