. A borrower has two alternatives for a loan: (1) issue a $510,000, 75-day, 8% note or (2) issue a $510,000, 75-day note that the creditor discounts at 8%. Assume a 360-day yenput your answers in the questions below.Ppen spreadsheeta. Calculate the amount of the interest expense for each option. Round your answer to the nearest dollar.for each alternative.b. Determine the proceeds received by the borrower in each alternative. Round your answers to the nearest dollar.(1) $510,000, 75-day, 8% interest-bearing note: $(2) $510,000, 75-day note discounted at 8%: $c. Alternativeis more favorable to the borrower because the borrower

When the money is provided to another person for the fixed time period, and upon the fixed interest…

borrower has two alternatives for a loan: (1) issue a $510,000, 75-day, 8% note or (2) issue a $510,000, 75-day note that the creditor discounts at 8%. Assume a 360-da put your answers in the questions below.

borrower has two alternatives for a loan: (1) issue a $510,000, 75-day, 8% note or (2) issue a $510,000, 75-day note that the creditor discounts at 8%. Assume a 360-da put your answers in the questions below.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 5FPE

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

A borrower has two alternatives for a loan: (1) issue a $510,000, 75-day, 8% note or (2) issue a $510,000, 75-day note that the creditor discounts at 8%. Assume a 360-day ye
nput your answers in the questions below.
Ppen spreadsheet
a. Calculate the amount of the interest expense for each option. Round your answer to the nearest dollar.
for each alternative.
b. Determine the proceeds received by the borrower in each alternative. Round your answers to the nearest dollar.
(1) $510,000, 75-day, 8% interest-bearing note: $
(2) $510,000, 75-day note discounted at 8%: $
c. Alternative
is more favorable to the borrower because the borrower

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