Evaluating Alternative Notes A borrower has two alternatives for a loan: (1) issue a $660,000, 120-day, 6% note or (2) issue a $660,000, 120-day note that the creditor discounts at 6%. Assume a 360-day year. a.  Calculate the amount of the interest expense for each option. $fill in the blank 1 for each alternative. b.  Determine the proceeds received by the borrower in each situation. (1) $660,000, 120-day, 6% interest-bearing note $fill in the blank 2 (2) $660,000, 120-day note discounted at 6% $fill in the blank 3 c.  Alternative   is more favorable to the borrower because the borrower   .

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Chapter7: Using Consumer Loans
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Evaluating Alternative Notes

A borrower has two alternatives for a loan: (1) issue a $660,000, 120-day, 6% note or (2) issue a $660,000, 120-day note that the creditor discounts at 6%. Assume a 360-day year.

a.  Calculate the amount of the interest expense for each option.
$fill in the blank 1 for each alternative.

b.  Determine the proceeds received by the borrower in each situation.

(1) $660,000, 120-day, 6% interest-bearing note $fill in the blank 2
(2) $660,000, 120-day note discounted at 6% $fill in the blank 3

c.  Alternative   is more favorable to the borrower because the borrower   .

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