FINANCE-Your business is doing well but you have ambitions to make it exceptional

Effective Cost of a Loan:

Your business is doing well but you have ambitions to make it exceptional. In order for your dreams to come true you will need to borrow $5 million dollars.

You seek the following terms:

• Annual interest ≤ 9.5%, a 2 ½ year term,
• All interest and principle payments deferred to the end of the 2 ½ year term of the loan
• Front-end costs ≤ $50,000.

Your criteria are based on what you determined to be your maximum effective cost.

Using the information provided, determine the effective cost AND whether your project maximums are acceptable.

Note: deferred payments compound over the life of this loan on a monthly basis.

**PLEASE SHOW & LIST ALL STEPS TO SOLUTION, THANK-YOU!**