ToysToys Corporation Wants to Borrow $500,000 for One Month

question 22

Multiple Choice

ToysToys Corporation wants to borrow $500,000 for one month. It uses its inventory as collateral for a 16% (APR) loan, under a warehouse arrangement where the warehouse fee is $14,000, paid at the end of the month. What is the EAR of this loan for ToysToys?

• A)4.1%
• B)15.4%
• C)45.8%
• D)62.6%

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