ABC Corp. agreed with the bank a P5,000,000 loan to be credited to ABC on May 1, 2022. The prevailing interest rate on Jan. 31 was 7% but they also entered into a forward rate agreement (FRA) 3-12 to set the interest of the future loan at 8%. The actual interest rate on May 1 was 10%. How much is the interest expense of ABC for the whole term of the loan

ABC Corp. agreed with the bank a P5,000,000 loan to be credited to ABC on May 1, 2022. The prevailing interest rate on Jan. 31 was 7% but they also entered into a forward rate agreement (FRA) 3-12 to set the interest of the future loan at 8%. The actual interest rate on May 1 was 10%. How much is the interest expense of ABC for the whole term of the loan

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

See similar textbooks

Related questions

Q: On December 31, 2023, Cullumber Company rendered services to Riverbed Corp. at an agreed price of…

A: We only have to use the tables provided, so, it is easier to calculate what is asked. The…

Q: On May 3, 2020, Leven Corporation negotiated a short-term loan of $660,000. The loan is due October…

A: Ordinary interest is a type of interest that is calculated based on the original principal amount of…

Q: On January 1, 2022, Cat Corporation sold goods to Rat Company. Rat Company signed a non-…

A: Notes Receivables: Notes receivables can be defined as the asset of the organization and they should…

Q: On January 1, 2025, Oriole Inc. issued a 10-year, $440,000 note at 7% fixed interest, interest…

A: An interest rate swap, also known as a financial derivative contract, is a financial agreement…

Q: What is the amount of loan extended to MAPCD Co

A: An extended loan means when the amount of the loan is increased by the lender of the loan. the note…

Q: Allen Inc. took out a 1-year, 8%, $100,000 loan on March 31, 2018. Interest is due upon maturity of…

A: Formula: Interest expense = Loan amount x Interest rate x Time period

Q: On January 1, 2021, Diggs Co. lends some money in exchange for a 10% $100,000 10-year note. The…

A: a)Coupon Rate =10%Market rate=8%The coupon rate is more than the Market rate i.e. It is issued at a…

Q: On January 1, 2021, Saltimbocca Corporation borrowed $192,772 from Morgan Stanley. Under the terms…

A: The question demands the interest expense for the third year of the loan. In order to determine…

Q: On January 1, 2020, MWB, Inc. borrowed cash by issuing a $600,000, 6-year note that specified 6%…

A: solution given Face value $600000 Life 6 year Coupon rate 6% If interest to…

Q: ABC Corp. signed a notes payable with DEF Inc. on June 1, 2021. The note providesthat ABC Corp. must…

A: The problem is asking us to find out how much ABC Corp. borrowed from DEF Inc. on June 1, 2021. We…

Q: Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the…

A: Debt restructuring may be classified as troubled debt restructuring or non-troubled debt…

Q: Cheyenne Corp, borrowed $1080000 from National Bank on May 31, 2019. The 3-year, 7% note required…

A: NOTES PAYABLE Notes payable are a liability. Notes Payable are Reported under both Non-Current &…

Question

On Jan. 31, 2022, ABC Corp. agreed with the bank a P5,000,000 loan to be credited to ABC on May 1, 2022. The prevailing interest rate on Jan. 31 was 7% but they also entered into a forward rate agreement (FRA) 3-12 to set the interest of the future loan at 8%. The actual interest rate on May 1 was 10%. How much is the interest expense of ABC for the whole term of the loan?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

B10.
Durango, Inc. borrowed $20,000 on October 1, 2020. Durango will not make any payments on this loan until October 1, 2023, and at that time Durango will owe $26,000. What will be the amounts shown on Durango's annual financial statements at December 31, 2022? O Interest expense of $2,000 and interest payable of $4,500 Interest expense of $4,500 and interest payable of $4,500 O Interest expense of $4,500 and interest payable of $1,500 Interest expense of $2,000 and interest payable of $1,500 O None of the above
On May 3, 2020, Leven Corporation negotiated a short-term loan of $645,000. The loan is due October 1, 2020, and carries a 5.30% interest rate. Use ordinary interest to calculate the interest. What is the total amount Leven would pay on the maturity date? (Use Days in a year table.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Maturity value
At January 1, 2024, Mahmoud Industries, Incorporated, owed Second BancCorp $12 million under a 10% note due December 31, 2026. Interest was paid last on December 31, 2022. Mahmoud was experiencing severe financial difficulties and asked Second BancCorp to modify the terms of the debt agreement. After negotiation Second BancCorp agreed to: Forgive the interest accrued for the year just ended. Reduce the remaining two years’ interest payments to $1 million each and delay the first payment until December 31, 2025. Reduce the unpaid principal amount to $11 million. Required: Prepare the journal entries by Mahmoud Industries, Incorporated, necessitated by the restructuring of the debt at (1) January 1, 2024; (2) December 31, 2025; and (3) December 31, 2026.
. On April 30, 2022, Lenny Inc. borrowed $10 million cash from Colonial Bank and issued a 5-month, noninterest-bearing note, priced to yield an effective interest rate of 10%. The stated discount rate on this loan is: A. More than the effective interest rate. B. Less than the effective interest rate. C. Equal to the effective interest rate. D. Unrelated to the effective interest rate
On May 3, 2020, Leven Corporation negotiated a short-term loan of $870,000. The loan is due October 1, 2020, and carries a 6.80% interest rate. Use ordinary interest to calculate the interest. What is the total amount Leven would pay on the maturity date? (Use Days in a year table.) Note: Do not round intermediate calculations. Round your answer to the nearest cent. Maturity value:
On December 31, 2021, Ainsley Company finished consultation services and accepted exchange a zero interest bearing of $ 995,000 and a due date of December 31, 2024. The implied interest rate is 12%. The following interest factors are provided Table Factors For Three Periods Future Value of 1 Present Value of 1 Future Value of Ordinary Annuity of 1 Present Value of Ordinary Annuity of 1 Interest Rate 6% 12% 1.19102 1.40493 0.83962 0.71178 3.18360 3.37440 2.67301 2.40183 Instructions (a) Determine the present value of the note. (b) Prepare the journal entries for the initial transaction , recognition of Interest each year, and the colle Instructions: Compute both a must show your work
On March 2021, Company A enters a forward rate agreement(FRA) with company B to borrow $1 million at 4% between October 2021 and December 2021(three months). The term structure of interest rates is flat at 5%. The value of the FRA contract for Company A is
Acc
On 1 January 2022, Rodney Inc. provided services to Smith Co. in exchange for Smith’s $300,000, 2-year 8% note with interest compounded semi-annually on July 1 and January 1. The current market rate of similar notes is 12%. Rodney Inc. financial year ends December 31. REQUIRED: 1. Provide the following input values from your financial calculator: N = I/Y = PMT = FV = 2. The note was issued at = 3. The present value of the note is =
On May 3, 2020, Leven Corporation negotiated a short-term loan of $660,000. The loan is due October 1, 2020, and carries a 5.40% interest rate. Use ordinary interest to calculate the interest. What is the total amount Leven would pay on the maturity date? (Use Days in a year table.) Note: Do not round intermediate calculations. Round your answer to the nearest cent.

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS