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

question 23

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.
-Which alternative should Taggart choose?

• A)Alternative #1 since it has the lowest EAR
• B)Alternative #2 since it has the lowest EAR
• C)Alternative #3 since it has the lowest EAR
• D)Alternative #2 since it has the highest actual rate

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Definitions:

Heinz Pickle Relish

A condiment produced by Heinz, made from diced pickles and used to enhance the flavor of foods like hot dogs and burgers.

Noncumulative Quantity Discount

A price reduction offered on a single purchase order rather than the total number of units bought over time.

Winston Brand

A brand name, which could be associated with multiple industries, but without context, it's unclear what specific products or company it refers to.

Chocolate Molds

Tools or containers used to shape chocolate into specific designs as it cools and solidifies.