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How much is the effective cost if you need to borrow $300,000 for one year with a discount loan of 8%? * 8.7% 20.28% 2.04% 17.65% O 12%

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 15EB: Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is...

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

How much is the effective cost if you need to borrow $300,000 for one year
with a discount loan of 8%? *
8.7%
20.28%
2.04%
O 17.65%
O 12%

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