YOUR company needs external financing. As VP for Finance, you approach three banks for a P5,000,000...

YOUR company needs external financing. As VP for Finance, you approach three banks for a P5,000,000 loan for three years . All three banks quoted a rate of 12 percent per annum, payable in equal monthly installments. The interest calculations are as follows:

 Bank X – flat basis

 Bank Y – annual rest basis

 Bank Z – reducing balance basis

Compute the Effective Annual Rate for the three banks.

Show your computations.

As borrower, which bank would you choose? Explain.

Expert Solution

jeff jeffy answered 2 years ago

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