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Question
A borrower has two alternatives for a loan: (1) issue a $480,000, 60-day, 8% note or (2) issue a $480,000, 60-day note that the creditor discounts at 8%. (Assume a 360-day year is used for interest computations.)
a. Compute the amount of the interest expense for each option.
b. Determine the proceeds received by the borrower in each situation.
Answer
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