Bank A offers the following terms for a $10 million loan: Interest rate: 8% for one year on funds borrowed Fees:

Bank A offers the following terms for a $10 million loan:

• Interest rate: 8% for one year on funds borrowed
• Fees: 0.5% of the unused balance for the unused term of the loan

Bank B offers the following term for a $10 million loan:

• Interest rate: 6.6% for one year on funds borrowed
• Fees: 2% origination fee

A. Which terms are better if the firm intends to borrow the $10 million for the entire year?

B. If the firm plans to use the funds for only three months, which terms are better?

*Please show all work. Thank you!*