On October 1, 2015, Yammy Co. borrows $400,000 from a bank. The loan is due...
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On October 1, 2015, Yammy Co. borrows $400,000 from a bank. The loan is due on September 30, 2018 (three years later), carries a 5% annual interest rate, and pays interest annually (i.e., on September 30, 2016, September 30, 2017, and September 30, 2018).
On October 1, 2015, Yammy Co. borrows $400,000 from a bank. The loan is due on September 30, 2018 (three years later), carries a 5% annual interest rate, and pays interest annually (i.e., on September 30, 2016, September 30, 2017, and September 30, 2018).
a) How much interest expense associated with the loan must Yammy record for the year ended December 31, 2015, if any? (2 points)
b) How much cash, in total (principal and interest), will Yammy pay the bank over the life of the loan? (1 point)
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