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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A loan carries a simple interest rate of 5.25 % . The loan was fully repaid by two $5000 payments made 8 and 11 months after the original date of the loan. How much was borrowed at the start? Multiple Choice $10,000 $9601.34 $9661.84 $9540.85 $9329.44
Prepare an amortization schedule for a three-year loan of $117,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? Note: Leave no cells blank. Enter '0' where necessary. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Year 1 2 3 $ Beginning Balance 117,000.00 Total Payment Total interest Interest Payment Principal Payment Ending Balance
PanAir Reservations (PAR) borrowed $270,000 for 36 days from its bank. The interest rate on the loan is 9 percent. Assume there are 360 days in a year. Calculate the APR and rEAR assuming the loan is a simple interest loan with no compensating balance requirement. Do not round intermediate calculations. Round your answers to two decimal places. APR: % rEAR: % Calculate the APR and rEAR assuming the loan is a simple interest loan with a 20 percent compensating balance requirement, and PAR currently holds no funds at the lending bank. Do not round intermediate calculations. Round your answers to two decimal places. APR: % rEAR: % How much would PAR have to borrow if it needed $270,000 to pay bills and the loan required a 20 percent compensating balance? Round your answer to the neares dollar. $
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? %
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $149,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.9% subject to a 10.4% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.9% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate the effective annual rate of interest on each loan. b. What could Weathers do that would reduce the effective annual rate on the State Bank loan? a. State Bank's semi-annual rate is %. (Round to two decimal places.)
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. %
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?
← Use PMT- to determine the regular payment amount, rounded to the nearest dollar. Your credit card has a balance of $3600 and an annual interest rate of 16% With no further 1- purchases charged to the card and the balance being paid off over three years, the monthly payment is $127, and the total interest paid is $972. You can get a bank loan at 8.5% with a term of four years. Complete parts (a) and (b) below. a. How much will you pay each month? How does this compare with the credit card payment each month? Select the correct choice below and fill in the answer boxes to complete your choice. (Do not round until the final answer. Then round to the nearest dollar as needed) This is 5 A. The monthly payments for the bank loan are approximately $ OB. The monthly payments for the bank loan are approximately $ This is 5 less than the monthly credit card payments more than the monthly credit card payments
Leven Corporation negotiated a short-term loan of $685,000. The loan is due in 10 months and carries a 6.86 interest rate. Use simple interest to calculate the total amount of thetioan. If necessary, round the answer to the nearest cent.
Everett's Electronics is receiving a senior bank loan with the following terms: $6MM principal, 5.6% interest rate, 7 year loan term, 0.75% commitment fee, and a 1% closing fee. What is the expected annual return to the lender? A. 5.85% B. 6.85% C. 5.91% D. 6.2%
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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