Please answer the first picture. The second picture is a format. Thankyou! B. Short term FundsPRINCESS Trading is engaged in the buying and selling of raw materials for sofa beds. Thebusiness is in need of funds to finance the operating activities of the business.The Partner Rural Bank is offering PRINCESS a loán of P500,000 for one year at 12% simpleinterest rate.Requíred: Compute the effective interest rate of the loan. Answer: the term of he bank loan is one year. Before computing for effective interest rate, the amount ofinterest for one year at 15% should be determined first. The interest for borrowing is:Interest = Principal x rate x time= P300,000 x 15% x 1= P45,000The effective annual interest rate at simple interest is computed as follows:EARPXT= P45,000 (P300,000 x 1)= 15%The effective annual interest rate is equal to the nominal annual rate because the term of loan is one year

Effective Annual Interest(EAR) refers to the rate that is due on the amount lent or amount invested…

PRINCESS Trading is engaged in the buying and selling of raw materials for sofa beds. The business is in need of funds to finance the operating activities of the business. The Partner Rural Bank is offering PRINCESS a loán of P500,000 for one year at 12% simple interest rate. Requíred: Compute the effective interest rate of the loan.

PRINCESS Trading is engaged in the buying and selling of raw materials for sofa beds. The business is in need of funds to finance the operating activities of the business. The Partner Rural Bank is offering PRINCESS a loán of P500,000 for one year at 12% simple interest rate. Requíred: Compute the effective interest rate of the loan.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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