Computation of the interest on the loan payable in due

Reference no: EM1312591

Computation of the interest on the loan payable in due and in advance

On July 1, 2007, Leach Company needs exactly $103,200 in cash to pay an existing obligation. Leach has decided to borrow from State Bank, which charges 14% interest on loans. The loan will be due in one year. Leach is unsure, however, whether to ask the bank for a) an interest-baring loan with interest and principle payable at the end of the year or b) a loan due in one year but with interest deducted in advance.

What will be the face value of the note assuming that

a. Interest paid when the loan is due?

b. Interest is deducted in advance?

Reference no: EM1312591

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