# Busn 379 Course Project

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• Published: March 5, 2012

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Course Project – Part 1
Task 1: Assessing loan options for AirJet Best Parts, Inc. 1.Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? Hint for National Bank: Go to the St. Louis Federal Reserve Board’s website (http://research.stlouisfed.org/fred2/). Select “Interest Rates” and then “Prime Bank Loan Rate”. Use the latest MPRIME. Show your calculations. Answer: National First Bank (Prime Rate 7,75% )

EAR = [(1+ ((7.75%)/2))^2 – 1
EAR = 7.90%
Regions Best
EAR = [(1+ ((13.42%)/12))^12- 1
EAR = 13.99% (14%)
2.Based on your calculations above, which of the two banks would you recommend and why? Explain your rationale. Answer: Based on calculations above, I would recommend borrowing from National First Bank. This is because prime rate 3.25%, and 6.75% EAR of national first bank is only 10.25% Vs Regions best is higher 13.99%(14%). National First Bank is semiannually and although it has a prime rate low, the APR is low as well compared to Regions Best. 3.AirJet Best Parts, Inc. has decided to take a \$8,100,000 loan being offered by Regions Best at 9.2% APR for 5 years. What is the monthly payment amount on this loan? Do you agree with this decision? Explain your rationale. Answer:

Loan: \$8,100,000
APR: 9.2%
Terms Of loan = 5 Years
Months = 60
FV = \$0
Monthly Payment (PMT) = \$168,930
Air Jet made right Decision to get loan from Region Best because its monthly payment would be lower at \$168,930 based on the APR of 9.2% compounded monthly. I agree with my decision, because based on high APR 9.2% and high loan amount, I get fair monthly payment.