Problem:
Dr. Ruth is going to borrow $5,000 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 6 percent and LIBOR 1.5 percent less. Also assume there will be a $40 transaction fee with LIBOR (this amount must be added to the interest cost with LIBOR). Which loan has the lower effective interest cost?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.Provide step by step solutions for the above question