Dr. Ruth is going to borrow $6,500 to help write a book. The loan is
prime rate or the LIBOR rate. Assume the prime rate is 7 percent and
transaction fee with LIBOR (this amount must be added to the intere
a. What is the effective interest rate on the LIBOR loan?
Note: Use a 360-day year. Do not round intermediate calculatic
places.
Effective interest rate
par
%
b. Which loan has the lower effective interest cost?