Cost of Bank Loans Gifts Galore Inc. borrowed $1.75 million from National City Bank. The loan was made at a simple annual interest rate of 11% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. Do not round intermediate calculations. Round your answers to two decimal places. a. The nominal annual rate on the loan was 11.75%. What is the true effective rate? % b. What would be the effective cost of the loan if the note required discount interest? % c. What would be the nominal annual interest rate on the loan if the bank did not require a suined thly installmente?

Cost of Bank Loans Gifts Galore Inc. borrowed $1.75 million from National City Bank. The loan was made at a simple annual interest rate of 11% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. Do not round intermediate calculations. Round your answers to two decimal places. a. The nominal annual rate on the loan was 11.75%. What is the true effective rate? % b. What would be the effective cost of the loan if the note required discount interest? % c. What would be the nominal annual interest rate on the loan if the bank did not require a suined thly installmente?

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

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The interest rate on a $15,300 loan is 9.7% compounded semiannually. Semiannual payments will pay off the loan in nine years. (Do not round intermediate calculations. Round the PMT and final answers to 2 decimal places.) a. Calculate the interest component of Payment 12. $ b. Calculate the principal component of Payment 5. Principal c. Calculate the interest paid in Year 8. Interest paid d. How much do Payments 5 to 8 inclusive reduce the principal balance? Principal reduction Interest
Cost of Bank Loans Del Hawley, owner of Hawley's Hardware, is negotiating with First City Bank for a 1-year loan of $65,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places. a. A 14% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. 14 b. A 10% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year. 12.5 c. An 8% annual rate on a discounted loan, with a 15% compensating balance. 9.41 % 9.38 % d. Interest figured as 9% of the $65,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year. Alternative A V % % Which alternative has the lowest effective annual interest rate?
Cost of Bank Loans Gifts Galore Inc. borrowed $1.6 million from National City Bank. The loan was made at a simple annual interest rate of 12% a year for 3 months. A 25% compensating balance requirement raised the effective interest rate. Do not round intermediate calculations. Round your answers to two decimal places. a. The nominal annual rate on the loan was 11.5%. What is the true effective rate? 12.00 % b. What would be the effective cost of the loan if the note required discount interest? 12.38 % c. What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments? %
Please answer fast i give you upvote.
Cost of Bank Loans Del Hawley, owner of Hawley's Hardware, is negotiating with First City Bank for a 1-year loan of $93,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places. a. A 11% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. 11 b. A 8% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year. 10 c. A 8.5% annual rate on a discounted loan, with a 15% compensating balance. * 8.5 7 % X % d. Interest figured as 7% of the $93,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year. Alternative B # % % Which alternative has the lowest effective annual interest rate?
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A firm borrows $200,000 at 10 percent from a bank with a compensating balance of 20 percent. What is the effective rate of interest if the loan is discounted and the principal is repaid at the end of one year? 15.28% 16.28% 17.28% 14.28% 19.55%
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H3. Show proper step by step calculation
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 ________ %
Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200,000 that it will accept as collateral. The bank's terms include a lending rate set at prime + 3.5% and a 1.5% commission charge. The prime rate currently is 9%. a. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 90% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? b. What is Scientific Software's effective annual rate of interest if it borrows $120,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 9% during the life of the loan.) a. The maximum amount that the bank will lend to Scientific Software is $ (Round to the nearest dollar.)

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