Discuss cost of a short-term bank loan

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Reference no: EM131488846

Question: (Cost of a short-term bank loan) Alex is considering getting a 6-months loan with a face value of $150,000 to build a new apartment. His current balance is $10,000 at a bank that offered an unsecured loan for 15 percent. The bank considers Alex as a reliable customer and decided not to ask for any additional compensation, but $10,000 should be deposited. Alex was offered a loan from another bank, where he does not have any transactions or any account, at 13 percent and compensation balance of 15 percent of the loan. If he accepts the second offer, Alex will need to transfer his $10,000 to the new bank, which costs him 1 percent of the total sum. Which offer do you think is more suitable for Alex? Why?

Reference no: EM131488846

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