In exchange for a $560 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 2.0% per quarter on any funds actually borrowed. 2. Maintain a 4% compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.150% of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Effective annual interest rate % b. Suppose your firm immediately uses $250 million of the line and pays it off in one year. What is the effective annual interest rate on this $250 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Effective annual interest rate %
In exchange for a $560 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 2.0% per quarter on any funds actually borrowed. 2. Maintain a 4% compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.150% of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Effective annual interest rate % b. Suppose your firm immediately uses $250 million of the line and pays it off in one year. What is the effective annual interest rate on this $250 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Effective annual interest rate %
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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15) Can i get help with this question please
![In exchange for a $560 million fixed commitment line of credit, your firm has agreed to do the following:
1. Pay 2.0% per quarter on any funds actually borrowed.
2. Maintain a 4% compensating balance on any funds actually borrowed.
3. Pay an up-front commitment fee of 0.150% of the amount of the line.
Based on this information, answer the following:
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate
calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate
b. Suppose your firm immediately uses $250 million of the line and pays it off in one year. What is the effective annual interest rate on
this $250 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F84393282-b929-4c46-8d27-d18c726dd70f%2F94cd3b59-b603-40f1-bff4-d50db5841978%2Fnqj32dp_processed.png&w=3840&q=75)
Transcribed Image Text:In exchange for a $560 million fixed commitment line of credit, your firm has agreed to do the following:
1. Pay 2.0% per quarter on any funds actually borrowed.
2. Maintain a 4% compensating balance on any funds actually borrowed.
3. Pay an up-front commitment fee of 0.150% of the amount of the line.
Based on this information, answer the following:
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate
calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate
b. Suppose your firm immediately uses $250 million of the line and pays it off in one year. What is the effective annual interest rate on
this $250 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate
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