P16-18 (similar to) Question Help Accounts receivable as collateral, cost of borrowing Maximum Bank has...
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P16-18 (similar to) Question Help Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200,000 that it will accept as collateral. The bank's terms include a lending rate set at prime +3.5% and a 2% commission charge. The prime rate currently is 9%. a. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? b. What is Scientific Software's effective annual rate of interest if it borrows $120,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 9% during the life of the loan.) a. The maximum amount that the bank will lend to Scientific Software is (Round to the nearest dollar.)
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