Question 1. Regis Clothiers can borrow from its bank at 11 percent to take a cash discount. The terms of the cash discount are 2/15, net 60. Should the firm borrow the funds?
Question 2. A pawn shop will lend you $2000 for 45 days at a cost of $5 interest. What is your effective rate of interest?
Question 3. Randall Corporation plans to borrow $200,000 for one year at 12 percent from the Waco State Bank. There is a 20 percent compensating balance requirement. Randall Corporation keeps minimum transaction balances of $10,000 in the normal course of business. This idle cash counts toward meeting the compensating balance requirement. What is the effective rate of interest?