Question 1. Delilah's Haircuts can borrow from its bank at 13 percent to take a cash discount. The terms of the cash discount are 2/15, net 55. Should the firm borrow the funds? Explain.
Question 2. Maxim Air Filters, Inc. plans to borrow $300,000 for one year. Northeast National Bank will lend the money at 10 percent interest and require a compensating balance of 20 percent. What is the effective rate of interest?