Ignoring commission and taxes was A local credit union negotiates thepurchase of a one-year interest rate capwith a cap rate of 4.75 percent with anational bank. The option has a notionalprincipal of 1.5million and costs 2,800. Inone year, interest rates are 5.65 percent.The local credit union's net profit,ignoring commissions and taxes, was

We must remove the option cost from the payment from the interest rate cap in order to estimate the…

Answered: A local credit union negotiates the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 30P

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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 this
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A certificate of deposit (CD) is an agreement between a bank and a saver in which the bank guarantees an interest rate and the saver commits to leaving his or her deposit in the account for an agreed-upon period of time. First National Bank offers 2-year CDs at 9.12% compounded daily, and Citywide Savings offers 2-year CDs at 9.13% compounded quarterly. Compute the annual yield for each institution and determine which is more advantageous for the consumer. (Round your answers to two decimal places.) FNB: r = % CS: r = % who has the better offer.
Xu Salon has a line of credit of $150,000 with an interest rate of 1.625 percent per quarter. The credit line requires that 2.25 percent of the unused portion of the credit line be deposited in a non-interest-bearing account as a compensating balance. Xu Salon's short-term investments are earning .35 percent per quarter. If the line of credit goes unused all year, what is the effective annual interest rate on this arrangement? Assume any funds borrowed or invested use compound interest. Give typing answer with explanation and conclusion
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?
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.)
During computation, you may round your integer data to two decimal places and your percentages and present value factors to four decimal places.
A company received a 10-year $10 million loan commitment from a bank at a fixed rate of 6.50%. The up-front commitment fee is 30 basis points and the unused portion of the loan is charged 12 basis points. The bank borrows a total of $5 million at the beginning of the year and none thereafter. What is the net cost of borrowing the $5 million? b) Explain how a letter of credit is created in international trade and its conversion to a banker's acceptance (BA).
A corporation arranges for a $10 million line of credit. The corporation needs to have regular access to $6 million of this amount. The bank also requires a compensating balance of 10%. The all-in rate is 6% and the commitment fee is 0.30% on the unused portion of the line. What is the annual interest rate? 59% 67% 83% 89%

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