Randall corporation plans to borrow

value: 2.00 points

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Problem 8-1 Cash discount [LO1]

Compute the cost of not taking the following cash discounts.

(a)

2/18, net 40. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places . Omit the "%" sign in your response.)

Cost of lost discount

%

(b)

2/18, net 65. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Cost of lost discount

%

(c)

3/11, net 50. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Cost of lost discount

%

(d)

4/19, net 120. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Cost of lost discount

%

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2.

value: 1.00 points

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Problem 8-2 Cash discount decision [LO1]

Regis Clothiers can borrow from its bank at 15 percent to take a cash discount. The terms of the cash discount are 2/16, net 90.

(a)

Compute the cost of not taking the cash discount. (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Cost of not taking a cash discount

%

(b)

Should the firm borrow the funds?

No

Yes

3.

value: 1.00 points

Problem 8-5 Effective rate of interest [LO2]

A pawn shop will lend $158 for 12 days at a cost of $12 interest.

What is the effective rate of interest? (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Effective rate

%

4.

value: 1.00 points

Problem 8-7 Effective rate on discounted loan [LO2]

Mary Ott is going to borrow $6,900 for 60 days and pay $223 interest.

What is the effective rate of interest if the loan is discounted? (Use 360 days in a year. Round your intermediate calculations and final answers to 2 decimal places. Omit the "%" sign in your response.)

Effective rate on discounted loan

%

5.

value: 1.00 points

Problem 8-8 Prime vs. LIBOR [LO2]

Dr. Ruth is going to borrow $7,200 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 12 percent and LIBOR 2.5 percent less. Also assume there will be a $45 transaction fee with LIBOR (this amount must be added to the interest cost with LIBOR).