Homework answers / question archive / Acct 352 Question #1) Your Company is considering a 1-year loan and has received the following proposals: Bank A offers a discount interest term loan with a stated 6

Acct 352 Question #1) Your Company is considering a 1-year loan and has received the following proposals: Bank A offers a discount interest term loan with a stated 6

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Acct 352 Question #1) Your Company is considering a 1-year loan and has received the following proposals:

1. Bank A offers a discount interest term loan with a stated 6.9% interest rate compounded annually and a compensating balance of 7.1%.  Payments are made monthly.
2. Bank B offers a term loan at a stated interest rate of 7.2% compounded weekly.  Payments are made weekly.
3. Bank C offers a term loan at a stated interest rate of 7.0% compounded monthly and with a compensating balance of 6%.  Payments are made monthly.
4. Bank D offers a discount interest term loan at a stated interest rate of 6.95% compounded every 6 months.  Payments are made monthly.

Required:

Explain which loan proposal you would recommend your company accept based on the effective cost only.