Use the Following Information to Answer the Question(s)below

question 36

Multiple Choice

Use the following information to answer the question(s) below.
Taggart Transcontinental needs a $100,000 loan for the next 30 days.Taggart has three alternatives available:
Alternative #1: Forgo the discount on its trade credit agreement that offers terms of 2/5 net 35.
Alternative #2: Borrow the money from Bank A,which has offered to lend the firm $100,000 for one month at
an APR of 9%.The bank will require a (no-interest) compensating balance of 10% of the face-value of the loan and will charge a $200 loan origination fee,which means that Taggart must borrow even more than the $100,000 they need.
Alternative #3: Borrow the money from Bank B,which has offered to lend the firm $100,000 for one month at an APR of 12%.The loan has a 1% origination fee.
-The effective annual rate for Taggart if they choose alternative #3 is closest to:

• A)13.9%.
• B)18.8%.
• C)27.0%.
• D)27.9%.

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Definitions:

Credible Message

Information or communication that is believable and trustworthy based on evidence or reputation.

Emotionally Based

Decisions or actions driven primarily by one's feelings rather than by analytical thinking.

Logic

The science of reasoning, proof, thinking, or inference, often used to structure arguments or analyze propositions.

High Pressure

Situations or environments characterized by intense stress, urgency, or force, often requiring quick decision-making.