Ask Question
1 January, 07:03

Robin needs $25,000 to start a business. In her search for the best (low cost) loan, she has gathered the following information from three local banks. Which bank would you recommend Robin borrow from? Bank Annual Payment Term (Years) A $9,000 3 B $7,000 4 C $6,000 5 Bank A Bank B Bank C Either Bank A and B since their loan rates are about the same Either Bank A and C since their loan rates are the same

+1
Answers (1)
  1. 1 January, 08:49
    0
    Bank A

    Explanation:

    To recommend from which bank Robin should borrow from, we need to calculate the interest which is the cost of borrowing from each of the banks.

    Note:

    Interest amount = Total amount to repay - Loan amount ... (1)

    Equation (1) is used as follows:

    Bank A:

    Interest = ($9,000 * 3) - $25,000 = $27,000 - $25,000 = $2,000

    Interest/loan rate = ($2,000 : $25,000) * 100 = 8%

    Bank B:

    Interest = ($7,000 * 4) - $25,000 = $28,000 - $25,000 = $3,000

    Interest/loan rate = ($3,000 : $25,000) * 100 = 12%

    Bank C:

    Interest = ($6,000 * 5) - $25,000 = $30,000 - $25,000 = $5,000

    Interest/loan rate = ($5,000 : $25,000) * 100 = 20%

    Recommendation

    Robin should borrow from Bank A since it offers the lowest loan rate of 8%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Robin needs $25,000 to start a business. In her search for the best (low cost) loan, she has gathered the following information from three ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers