ABC Manufacturing plans to borrow $500,000 from a bank for one year. The nominal interest rate is 8 percent, and the bank requires a compensating balance of 20 percent. What is the effective rate of interest?
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- If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?You plan to borrow $10,000 from the bank. For a four-year loan, the bank requires annual end-of-year payments of $3,223.73. What is the annual interest rate on this loan?Suppose you borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value What effective annual interest rate are yo being charged
- Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discount interest loan). Also, assume that the bank requires you to maintain a compensating balance equal to 10 percent of the initial loan value. What effective annual interest rate are you being charged?Van Buren Resources Inc. is considering borrowing $90,000 for 175 days from its bank. Van Buren will pay $3,000 of interest at maturity, and it will repay the $90,000 of principal at maturity. Assume that there are 365 days per year. Calculate the loan’s annual financing cost. Round your answer to two decimal places. % Calculate the loan’s annual percentage rate. Round your answer to two decimal places. % What is the reason for the difference in your answers to Parts a and b? The does not consider compounding effects.Van Buren Resources Inc. is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity. a. Calculate the loan’s annual financing cost. b. Calculate the loan’s annual percentage rate. c. What is the reason for the difference in your answers to Parts a and b?
- Automotive Accessories needs to borrow $135,000 for 6 months for renovations. It is considering two financing options: Bank Helping Hand offers an 8% annual rate subject to a 10% compensating balance. Bank Friendly Financer offers the funds as a discount loan with an annual rate of 8%. Automotive Accessories maintains no deposit balances in either bank, and repayment will be a single lump sum at maturity. a.What is the effective annual rate of interest on each loan? b.What can Automotive Accessories do to reduce the interest rates on these loans?Suppose that you borrow $10,000 from a bank to purchase a car. You agree with the bank to repay the loan into equal payments every four months for one year. If the interest rate is 16% compounded quarterly, calculate the interest paid, principal paid, and the end balance for each period until the loan is totally repaid.Suppose you borrow $21,000 from your bank to buy a car. You agree to pay $433.89 per month for 60 months. What is the interest rate (APR) for the loan?
- You borrow $10,000 from a bank for three years at an annual interest rate, or annual percentage rate (APR), of 12%. Monthly payments will be made until all the principal and interest have been repaid. Solve, a. What is your monthly payment? b. If you must pay two points up front, meaning that you get only $9,800 from the bank, what is your true APR on the loan?You plan to invest $10,000 for 180 days. Your bank offers a rate of 2.60% on 90-day GICS and 2.85% on 180-day GICS. How much more interest will you earn if you purchase a single 180-day GIC instead of two consecutive 90-day GICS? Remember that the interest earned from the first 90-day GIC will be invested in the second 90-day GIC along with the principal. Express your answer to 2 decimal places but do not include the $ sign. Your Answer: AnswerA commercial bank is willing to make you a loan of P10,000. The bank wants a 12 percent interest rate and requires five equal annual payments to repay both interest and principal. What will be the dollar amount of the annual payment?
