Lightbulbs

Lightbulbs.com sells industrial and institutional lighting supplies through its website. It sells directly to businesses and organizations such as universities and hospitals on terms of net 90. To finance its rather large investments in receivables and inventory, the firm has an average need for $2,000,000 in short-term loans. It is choosing between 3 alternative arrangements:
Converse Bank offers a 4.75% APR with interest and principal paid at the end of the year.
Guaranty Bank offers a rate of 4.5% with interest discounted at the time of the loan.
County Bank offers 4.25% with a 10% compensating balance.
Which bank offers the APR when all terms of the loan are considered? You may assume that required amounts are borrowed for the full year.

Correct Answer:

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Converse Bank's rate is simply 4.75%.
Gu...

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