A company is considering an issue of Commercial Paper (CP) to raise $15 million. The issue will mature in 30 days. It will be issued at a discount of 40 basis points. The -0,4% dealer will charge an annualized fee of 10 pasis points and will require a backup letter 0.1% of credit (L/C) to be issued in its favour at a cost of 25 basis points. 0.25%. Required: Assuming a 360-day year, calculate: Par value Dolar discount a) the usable funds that the company will raise upon issue of the CP b) the pro-rated dealer fee c) the pro-rated L/C fee d) the effective annual interest that the company is paying for the credit it raises through the issue of CP -

A company is considering an issue of Commercial Paper (CP) to raise $15 million. The issue will mature in 30 days. It will be issued at a discount of 40 basis points. The -0,4% dealer will charge an annualized fee of 10 pasis points and will require a backup letter 0.1% of credit (L/C) to be issued in its favour at a cost of 25 basis points. 0.25%. Required: Assuming a 360-day year, calculate: Par value Dolar discount a) the usable funds that the company will raise upon issue of the CP b) the pro-rated dealer fee c) the pro-rated L/C fee d) the effective annual interest that the company is paying for the credit it raises through the issue of CP -

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Miracle Bhd requires RM500,000 ti finance its operations. The following short-termresources of financing are available: Alternative I A loan from OCS Bank with simple interest rate of 9 percent per annum for 3 months. A 20 percent compensating balance is required. Alternative II Issue commercial papers at a face value of RM5,000 per paper. The interest is 8 percent per annum for 270 days maturity period. The issuing cost is RM150 per paper. Alternative III A revolving line of credit of RM550,000 for a 1 percent commitment fee on the unused funds and an 8 percent interest rate. i) Calculate the effective interest rate for each alternative. ii) Justify the best alternative for Miracle Bhd.
An automobile with a total transaction price of $20,000 with a down payment of 20% is being financed for 48 months. Banks and credit unions require a monthly payment of $400.36. What is the APR for this auto loan? Use the table in the Business Math Handbook
A loan of $15,000 is to be financed over a period of 24 months. The agency quotes a nominal interest rate of 6% for the first 12 months and a nominal interest rate of 9% for any remaining unpaid balance after 12 months with both rates compounded monthly. At these rates, what equal end-of-the-month payment for 24 months would be required in order to repay the loan? (Choose the closest answer)
A loan of $25,000 is to be repaid by thirty-three end-of-month payments. The first payment is $700 and then each payment is $25 more than the previous payment. Find the annual yield rate correct to the nearest hundredth of a percent. [HINT: The Cash Flow worksheet only accepts twenty-four payments, or thirty-two if you have a BA II Plus Professional calculator. If you are working with the BA II Plus calculator, suppose that the payments beyond the twenty-fourth, which you do not have registers to accommodate, are made along with the twenty-fourth. Now use the "guess and check" method, obtaining your first estimate by using IRR CPT. This is a challenging problem, especially for those of you with only 24 registers. However, when performing the successive calculations required by the "guess and check" method, you may make judicious use of the NPV subworksheet to decrease your work.]
(Cost of factoring) MDM Inc. is considering factoring its receivables. The firm has credit sales of $300,000 per month and has an average receivables balance of $600,000 with 60-day credit terms. The factor has offered to extend credit equal to 89 percent of the receivables factored less interest on the loan at a rate of 1.3 percent per month. The 11 percent difference in the advance and the face value of all receivables factored consists of a 2 percent factoring fee plus a 9 percent reserve, which the factor maintains. In addition, if MDM Inc. decides to factor its receivables, it will sell them all, so that it can reduce its credit department costs by $1,200 a month. a. What is the cost of borrowing the maximum amount of credit available to MDM Inc. through the factoring agreement? Note: Assume a 30-day month and 360-day year. b. What considerations other than cost should MDM Inc. account for in determining whether to enter the factoring agreement? The cost of borrowing the maximum…
A motorcycle is for sale for $20,200. The dealer is willing to sell it on the following terms: No down payment; pay $300 at the end of each of the first 6 months; pay $500 at the end of each month after that until the loan has been paid in full.At a 12% annual interest rate compounded monthly, how many $500 payments will be required?
Fishing Designs has arranged to borrow $20,000 today at 10% interest. The loan is to be repaid with end-of-year payments of $3,000 at the end of years 1 through 4. At the end of year 5, the remainder will be paid. What is the year 5 payment? $ Round entry to the nearest dollar. Tolerance is ±4.
(Cost of commercial paper) Tri-State Enterprises plans to issue commercial paper for the first time in the firm's 35-year history. The firm plans to issue $400,000 in 270-day maturity notes. The paper will carry a 9.50 percent rate with discounted interest and will cost Tri-State $14,000 (paid in advance) to issue. Note: Assume a 30-day month and 360-day year. a. What is the effective cost of credit to Tri-State? b. What other factors should the company consider in analyzing whether to issue the commercial paper? a. The effective cost of credit, or APR, to Tri-State is%. (Round to two decimal places.) (・・・)
Crane Excavating Inc. is purchasing a bulldozer. The equipment has a price of $103,000. The manufacturer has offered a payment plan that would allow Crane to make 10 equal annual payments of $18,229.37, with the first payment due one year after the purchase. (a) Your answer is correct. How much total interest will Crane pay on this payment plan? (Round answer to 0 decimal places, e.g. 458,581.) Total interest eTextbook and Media 79,293.7 Attempts: 1 of 15 used
Miller borrows $370,000 to be paid off in four years. The loan payments are semiannual with the first payment due in six months, and interest is at 8%. What is the amount of each payment? Note: Use tables, Excel, or a financial calculator. Round your final answer to the nearest whole dollar. (FV of $1, PV of $1, FVA of $1, and PVA of $1). Multiple Choice О $62,451 О $118,400 $122,549 О $54,955
XYZ Construction Inc. wants to purchase a new pick-up truck. The price for the new truck is $43, 688. The dealer allows XYZ to trade - in the old truck for $5,224. XYZ can payback the remaining balance through a 4-year payment plan. Given the agreed interest rate is 3%: How much is the monthly payment?
Lancaster Lumber buys $8 million of materials (net of discounts) on terms of 3/5, net 40, and it currently pays on the 5th day and takes discounts. Lancaster plans to expand, which will require additional financing. Assume 365 days in year for your calculations. If Lancaster decides to forgo discounts, how much additional credit could it obtain? Write out your answer completely. For example, 5 million should be entered as 5,000,000. Do not round intermediate calculations. Round your answer to the nearest cent. %24 What would be the nominal cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % What would be the effective cost of that credit? Do not round intermediate calculations. Round your answer to two decimal places. % If the company could get the funds from a bank at a rate of 9%, interest paid monthly, based on a 365-day year, what would be the effective cost of the bank loan? Do not round intermediate calculations. Round your…

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