Neveready Flashlights Inc. needs $340,000 to take a cash discount of 3/17, net 72. A banker will lend the money for 55 days at an interest cost of $10,400. What is the effective rate on the bank loan? tion in mind. 20.04% 3.06% 4.25% 10% How much would it cost (in percentage terms) if the firm did not take the cash discount, but paid the bill in 72 days instead of 17 days? 3.0% 97% 6.55% 15% Should the firm borrow the money to take the discount? No Yes I don't know Sometimes If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $340,000? $10,000 $1,000 $100,000 ○ $425,000 What would be the effective interest rate in part d if the interest charge for 55 days were $13,000? Should the firm borrow with the 20 percent compensating balance? (The firm has no funds to count against the compensating balance requirement.) 3.0% 6.55% 6.0% 5.0%
Neveready Flashlights Inc. needs $340,000 to take a cash discount of 3/17, net 72. A banker will lend the money for 55 days at an interest cost of $10,400. What is the effective rate on the bank loan? tion in mind. 20.04% 3.06% 4.25% 10% How much would it cost (in percentage terms) if the firm did not take the cash discount, but paid the bill in 72 days instead of 17 days? 3.0% 97% 6.55% 15% Should the firm borrow the money to take the discount? No Yes I don't know Sometimes If the banker requires a 20 percent compensating balance, how much must the firm borrow to end up with the $340,000? $10,000 $1,000 $100,000 ○ $425,000 What would be the effective interest rate in part d if the interest charge for 55 days were $13,000? Should the firm borrow with the 20 percent compensating balance? (The firm has no funds to count against the compensating balance requirement.) 3.0% 6.55% 6.0% 5.0%
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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Transcribed Image Text:Neveready Flashlights Inc. needs $340,000 to take a cash discount of 3/17, net 72. A banker
will lend the money for 55 days at an interest cost of $10,400.
What is the effective rate on the bank loan? tion in mind.
20.04%
3.06%
4.25%
10%
How much would it cost (in percentage terms) if the firm did not take the cash discount, but
paid the bill in 72 days instead of 17 days?
3.0%
97%
6.55%
15%
Should the firm borrow the money to take the discount?
No
Yes
I don't know
Sometimes
If the banker requires a 20 percent compensating balance, how much must the firm borrow to
end up with the $340,000?
$10,000
$1,000
$100,000
○ $425,000
What would be the effective interest rate in part d if the interest charge for 55 days were
$13,000? Should the firm borrow with the 20 percent compensating balance? (The firm has
no funds to count against the compensating balance requirement.)
3.0%
6.55%
6.0%
5.0%
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