Compounded quarterly or borrowing money from a bank

Assignment Help Business Economics

Reference no: EM13978709

You have a choice of borrowing money from a finance company at 24 percent compounded quarterly or borrowing money from a bank at 26 percent compounded annually. Which alternative is the most attractive?

If you can borrow funds from a finance company at 24% compounded quarterly, the EAR for the loan is what %.

If you can borrow funds from a bank at 26% compounded annually, the EAR for the loan is what %?

What is the better option?

Reference no: EM13978709

Questions Cloud

What are forward price and initial value of forward contract : A stock is expected to pay a dividend of $1 per share in two months and in five months. The stock price is $50, and the risk-free rate of interest is 8% per annum with continuous compounding for all maturities. An investor has just taken a short posi..

Determine the distance that wire should be mounted : Determine the distance that wire 1 should be mounted above wire 2 in order for it to be held in place by magnetic repulsion.

Display a prompt indicating that the input was invalid : The employee ID shall be generated by adding 1 to the largest employee ID already in the employee memory object (or employee.txt data file).

What is an upper bound for the one-year futures price of oil : The spot price of oil is $110 per barrel and the cost of storing a barrel of oil for one year is $3.25, payable at the end of the year. The risk-free interest rate is 6% per annum, continuously compounded. What is an upper bound for the one-year futu..

Compounded quarterly or borrowing money from a bank : You have a choice of borrowing money from a finance company at 24 percent compounded quarterly or borrowing money from a bank at 26 percent compounded annually. Which alternative is the most attractive? If you can borrow funds from a bank at 26% comp..

How much water diversion capacity does tom build : Draw graphs of both the PDF (g(•)) and CDF (G(.)) of Strawberry Creek's annual flow. Be precise with your axes. How much water diversion capacity does Tom build?

What are forward price and value of the forward contract : A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $38 and the risk-free rate of interest is 8% per annum with continuous compounding. a) What are the forward price and the initial value of the for..

How effective is cbt compared to drug therapy : What are the theories and techniques behind each evidence-based treatment? What mechanisms appear to make the treatment effective? How effective is CBT compared to drug therapy in treating GAD

What is the levered value of the equity : Alexandria's Dance Studio is currently an all equity firm that has 60,000 shares of stock outstanding with a market price of $24 a share. The current cost of equity is 11% and the tax rate is 40%. Alexandria is considering adding $2 million of debt w..

User Account

All Pages