Consider a $5,000, 6%, 180-day interest-bearing note and a non-interest- bearing note for the same amount and time period with a bank discount of 6%. From the borrower’s point of view, which is the better loan and why?

Consider a $5,000, 6%, 180-day interest-bearing note and a non-interest- bearing note for the same amount and time period with a bank discount of 6%. From the borrower’s point of view, which is the better loan and why?

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 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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Question

Consider a $5,000, 6%, 180-day interest-bearing note and a non-interest-

bearing note for the same amount and time period with a bank discount of 6%. From the borrower’s point of view, which is the better loan and why?

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