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A company has a choice between taking a $229k loan or accepting a cash discount terms...

A company has a choice between taking a $229k loan or accepting a cash discount terms 2.9/18, net 75. A creditor will loan the money for 2 years at an interest cost of $12.2k. The creditor requires a 21% compensating balance. However, the company ordinarily maintains 52% of that requirement. If the company takes the loan, it must provide monthly payments to retire the obligation.

Note: The term “k” is used to represent thousands (× $1,000).

Required: What is the absolute percentage difference in the effective rate of interest (ERI) between the two alternatives?

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