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The Raymar Company is preparing its cash budget for the months of April and May. The firm has established a $200,000 line of credit with its bank at a 12% annual rate of interest on which borrowings for cash deficits must be made in $10,000 increments. There is no outstanding balance on the line of credit loan on April Principal repayments are to be made in any month in which there is a surplus of cash. Interest is to be paid monthly. If there are no outstanding balances on the loans, Raymar will invest any cash in excess of its desired end-of-month cash balance in U.S.?Treasury bills. Raymar intends to maintain a minimum balance of $100,000 at the end of each month by either borrowing for deficits below the minimum balance or investing any excess cash. Expected monthly collection and disbursement patterns are shown below.  In May, Raymar will be required toA. Repay $20,000 principal and pay $1,000 interest. B. Repay $90,000 principal and pay $100 interest. C. Pay $900 interest. D. Borrow an additional $20,000 and pay $1,000 interest. |