A local credit union negotiates the purchase of a one-year interest rate cap with a cap rate of 4.75 percent with a national bank. The option has a notional principal of 1.5million and costs 2,800. In one year, interest rates are 5.65 percent. The local credit union's net profit, ignoring commissions and taxes, was
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- A local credit union negotiates the purchase of a one-year interest rate cap with a cap rate of 4.75 percent with a national bank. The option has a notional principal of 1.5million and costs 2,800. In one year, interest rates are 5.65 percent. The local credit union's net profit, ignoring commissions and taxes, was_.answer thisCumberland Furniture wishes to establish a prearranged borrowing agreement with its local commercial bank. The bank’s terms for a line of credit are 3.30% over the prime rate, and each year the borrowing must be reduced to zero for a 30-day period. For an equivalentrevolving credit agreement, the rate is 2.80% over prime with a commitment feeof 0.50% on the average unused balance. With both loans, the required compensating balance is equal to 20% of the amount borrowed. The prime rate is currently 8%. Both agreements have $4 million borrowing limits. The firm expects on average to borrow $2 million during the year no matter which loan agreement it decides to use. What is the effective annual rate under the line of credit? b. What is the effective annual rate under the revolving credit agreement? (Hint: Compute the ratio of the dollars that the firm will pay in interest and commitment fees to the dollars that the firm will effectively have used of.) If the firm does expect to borrow…Cloud Venture has a line of credit with a local bank of $75,000. The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed. What is the effective interest rate if the firm needs $58,000 for one year to finance a fixed asset purchase?
- Bank M offers the following terms for a $10 million loan: interest rate: 8 percent for one year on funds borrowed fees: 0.5 percent of the unused balance for the unused term of the loan Bank N offers the following terms FOR A $10 million loan interest rate 6.6 percent for one year on fund borrowed fees: 2 percent 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?Leven Corporation negotiated a short-term loan of $685,000. The loan is due in 10 months and carries a 6.86 interest rate. Use simple interest to calculate the total amount of thetioan. If necessary, round the answer to the nearest cent.A financial institution made a $2,000,000 1-year discount loan at 11% interest, requiring a compensating balance equal to 66% of the face value of the loan. Determine the effective annual rate associated with this loan. (Note: Assume that the firm currently maintains $0 on deposit in the financial institution.) The effective annual rate associated with the loan is ___ %. (Round to two decimal places.)
- What is the effective annual rate on this loan for this financial accounting question?You borrow $1,000 from the bank and agree to repay the loan over the next year in 12 equal monthly payments of $90. However, the bank also charges you a loan initiation fee of $18, which is taken out of the initial proceeds of the loan. What is the effective annual interest rate on the loan, taking account of the impact of the initiation fee? Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Use a financial calculator or Excel. Effective annual interest rate 1.49 %A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $23,000, the interest for the year will be $3,910. Because you must repay a total of $26,910 in one year, the finance company requires you to pay $26,910 divided by 12, or $2,242.50, per month over the next 12 months. Is this a 17 percent loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) What rate would legally have to be quoted? Annual percentage rate % What is the EAR? Effective annual rate %
- East Side Bank offers the following effective rates on 5-year loans: 8% for the first two years, 10% for the third year, 11% for the fourth year, and 12% on the fifth year. If Php. 500 000.00 is borrowed, determine the lump-sum amount to be paid at the end of the loan period.Victory Markets, LLC ("VML") has a bank loan with a total principal of $3,800,000. The stated annual interest rate for the loan is 8.40%, and the loan is to be amortized with monthly payments over 6 years. VML wants the bank to change the provisions of the loan such that payments are made on an annual basis. What would be the economically equivalent annual interest rate (i.e., economically equivalent to 8.40% compounded monthly) for a loan with annual payments? 8.6632% 8.7311% 9.0023% 8.5987%Southwestern Bank offers to lend you $55,000 at a nominal rate of 6.40%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Woodburn Bank also offers to lend you the $55,000, but it will charge an annual rate of 7.2%, with no interest due until the end of the year. How much higher or lower is the effective annual rate charged by Woodburn versus the rate charged by Southwestern? Group of answer choices 0.67% 0.83% 0.75% 0.53% 0.61%