Question

Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows:

January $ 10,100 April $ 10,100 February 4,100 May 11,100 March 5,100 June 6,100

Short-term financing will be utilized for the next six months. Projected annual interest rates are: January 5.0 % April 12.0 % February 6.0 % May 12.0 % March 9.0 % June 12.0 %

a. Compute total dollar interest payments for the six months. (Round your monthly interest rate to 2 decimal places when expressed as a percent. Round your interest payments to the nearest whole cent.)

b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six months? (Round your monthly interest rate to 2 decimal places when expressed as a percent. Round your interest payments to the nearest whole cent.)

b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller than with the short-term financing plan? Larger OR Smaller

Answer 1