ABC Company acquired a loan from New Kensington Bank in the amount of $120,000 witha 8% interest rate. The loan will be repaid in exactly one year. A stipulation of the loanrequires ABC Company to keep a compensating balance of $25,000 in a New KensingtonBank checking account. What is the effective interest rate that ABC Company will pay?Please round to the second decimal place.10.11%9.67%8.00%6.62%

The question is related to Effective Interest rate. The details given are Amount of loan =…

Answered: ABC Company acquired a loan from New…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 6%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 6%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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First American Bank charges 10.8 percent compounded monthly on its business loans. First Fifth Bank charges 11 percent compounded semiannually. Calculate the EAR for each bank. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) f3 First National Bank First United Bank % % As a potential borrower, which bank would you go to for a new loan? ** f4 f5 f6 Search ムー 17 4+ First National Bank hp f8 fg f10 144 DII DDI f11
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Determine the annual financing cost of a 1-year (365 day), $9,000 discounted bank loan at a stated annual interest rate of 10.0 percent. Assume that no compensating balance is required. Round your answer to two decimal places. %
A loan of $1980 can be repaid in 145 days by paying the principal sum borrowed plus $55 interest. What was the rate of interest charged? The interest rate is%. (Round the final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.)
A bank customer borrows X at an annual effective rate of 12.5% and makes level payments at the end of each year for n years. (i) The interest portion of the final payment is 153.86. (ii) The total principal repaid as of time (n − 1) is 6009.12. (iii) The principal repaid in the first payment is Y. Calculate Y. OA. 500 OB. 470 O C. 480 O D. 490 OE. 510
A local bank advertises the following deal: "Pay us $100 at the end of each year for 10 years and then we will pay you (or your beneficiaries) $100 at the end of each year forever." a. Calculate the present value of your payments to the bank if the interest rate is 6%. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value b. What is the present value of a $100 perpetuity deferred for 10 years if the interest rate is 6%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Present value c. Is this a good deal? Yes No
A bank lends some money to a business. The business will pay the bank a single payment of $184,000 in ten years time. How much greater is the present value (PV) of this payment if the interest rate is 9% rather than 8%? A. $10,506 B. $9,005 C. $6,003 D. $7,504
Navy Bank requires borrowers to keep a 13 percent compensating balance. Gorman Jewels borrow $380,000 at a 6 percent stated APR. What is the effective interest rate on the loan? (Round answer to 2 decimal places, e.g. 12.25%.) Effective interest rate ________ %

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