On a $10,000 principal investment, a bank offered interest rates of 3.45% on 270- to 364-day GIC's and 3.15% on 180- to 269-day GICS. How much more will an investor earn from a 364-day GIC than from two consecutive 182-day GICS? (Assume that the interest rate on 180- to 269-day GICS will be the same on the renewal date as it is today. Remember that both the principal and the interest from the first 182-day GIC can be invested in the second 182-day GIC.)

On a $10,000 principal investment, a bank offered interest rates of 3.45% on 270- to 364-day GIC's and 3.15% on 180- to 269-day GICS. How much more will an investor earn from a 364-day GIC than from two consecutive 182-day GICS? (Assume that the interest rate on 180- to 269-day GICS will be the same on the renewal date as it is today. Remember that both the principal and the interest from the first 182-day GIC can be invested in the second 182-day GIC.)

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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Find the present worth, from a bank’s perspective, of a loan that has annual payments that began at $300 and fell to $220 at a constant rate between the first payment at the end of the first year and the end of the fifth year. The rate of interest is 10%. Typed answer please. I ll rate
Bank K is about to sign a loan agreement with a mining company.The current LIBOR rate is 8%.The risk premium for the company has been estimated as 3% and the origination fee will be 0.1875 percent.The bank will be requesting a 9% compensating balance requirement.If the reserve requirement is 6%,what is the promised gross return on the loan?
A commercial bank estimates that its fixed rate assets are earning an average interest income of 10%, while its variable rate liabilities are forecast to pay the interest rates below: End of Year 0 1 2 3 4 5 LIBOR 7% 8% 12% 13% 11% Interest Rate Ceiling 10% 10% 10% 10% 10% Suppose it sets up an interest rate ceiling arrangement with another financial institution at 10%. Assuming a notional amount of $50,000,000 and using the LIBOR forecast for each year to discount back the payments incurred, what would be the present value of these payments?
(Related to Checkpoint 18.2) (Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 14 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $90,000 for a period of 6 months, what is the annualized cost of the bank loan? The annualized cost of the bank loan is %. (Round to two decimal places.)
The financial manager obtains a quote from a third bank, Bank TMN, for interest on the loan at 10.5%, compounded bi-annually without calculating the effective annual rate (EAR for the loan from bank TMN, would you expect the EAR to be higher or lower than the EAR for the loan from bank DEF?
TBTF Bank makes a 3 year interest only loan to AFC Inc of $2,350,000.00. The interest rate on the loan is ¡ (52) = 12.500%, and the payments will be made quarterly. TBTF reinvests the payments at an interest rate of ¡(26) = 14.250%. At maturity, what is TBTF Bank's annual ROI over the lifetime of the loan? (AFC does not default.) a. 11.289% b. 12.241% C. 13.601% d. 14.009% e. 12.377%
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.
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%
The Royal Bank pays an interest rate of 0.6% on redeemable GICs and 0.75% on non-redeemable GICs. In order to retain the redemption privilege, how much interest must be sacrificed on an investment of $15,000 for 120 days?
Let's say you are a credit analyst in the asset management department of a large bank or insurance company. The credit department is researching an investment in a syndicated loan made to a large firm. The loan is an “amortized loan” with a 7% interest rate payable semi-annually. The original term was 10 years. For analytical purposes, assume the loan trades in $1000 increments. What are the semi-annual payments on the loan? * PLEASE USE EXCEL AND SHOW WHAT FUNCTIONS/FORMULAS YOU USED*

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