On April 2, 2020, shortly after the $7.5 million deposit outflow, Key Bank had borrowed the needed fund inthe fed funds market to cover the shortfall in reserves for the remainder of the month (29 days, from 4/2 to4/30). The required yield on a discount basis was 1.5%.On April 30, 2020, Key Bank finally received the first required payments from its mortgages, loan, and T-bills,and it also paid off its fed funds loan. Key Bank was required to establish a loan loss reserve at 0.5% of thecommercial loan value and the bank was in the 35% tax bracket. The bank had not engaged in any off-balance-sheet activities.Question: What was the value of bank's risk-weighted assets (RWA) for its first month of operation?O $155,932,756.48O $160,773,451.60O $175,402.215.43O $130,426,340.40

Given Deposit Outflow = 7.5million Yield on discount basis = 1.5% Loss Reserve = 0.5% Tax Bracket =…

Answered: On April 2, 2020, shortly after the…

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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SureWin Company owes an amount of debt to a bank and the bank proposed the following annual payments to pay off the debt. Year 0 (Today): 20,000 Year 1: 24,000; Year 2: 30,000; Year 3: 30,000; Year 4: 35,000; (1) If the appropriate interest rate that bank is charging is APR 6% annual compounding, what would be the amount to debt owed today? (2) If SureWin can negotiate with the bank to pay yearly equal instalments over 4 years starting from the end of year 1 with the same 6% annual interest rate, what would be the amount of yearly payment? (3) If the bank accepts SureWin proposal in (2), what would be the interest amount paid to the bank in the first year?
Weathers Catering Supply, Inc., needs to borrow $145,000 for 6months. State Bank has offered to lend the funds at an annual rate of 8.6% 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 8.6% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. State Bank's semi-annual rate is ? (Round to two decimal places.) State Bank's effective annual rate is ? (Round to two decimal places.) Frost Finance's semi-annual rate is ? (Round to two decimal places.) Frost Finance's effective annual rate is ? (Round to two decimal places.)
Ranger Enterprises is considering pledging its receivables to finance a needed increase in working capital. Its commercial bank will lend 70 percent of the pledged receivables at 2.5 percentage points above the prime rate, which is currently 10 percent. In addition, the bank charges a service fee equal to 2 percent of the pledged receivables. Both interest and the service fee are payable at the end of the borrowing period. Ranger’s average collection period is 55 days, and it has receivables totaling $7 million that the bank has indicated are acceptable as collateral. Calculate the annual financing cost for the pledged receivables. Assume that there are 365 days per year. Round your answer to two decimal places. %
Prepare the debtors collection period for the four quarters of 2021
Lowlife Company defaulted on a $200,000 loan that was due on December 31, 2024. The bank has agreed to allow Lowlife to repay the $200,000 by making a series of equal annual payments beginning on December 31, 2025. Required: 1. Calculate the required annual payment of the bank's Interest rate is 10% and four payments are to be made. 2. Calculate the required annual payment of the bank's Interest rate is 8% and five payments are to be made. 3. If the bank's Interest rate is 10%, how many annual payments of $28,156 would be required to repay the debt? 4. If three payments of $72,070 are to be made, what interest rate is the bank charging Lowlife? Note: For all requirements, Use tables, Excel, or a financial calculator. (FV of $1. PV of $1. FVA of $1. PVA of $1, FVAD of $1 and PVAD of $1) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Calculate the required annual payment if the bank's interest rate is 10% and four payments…
Colson Company has a line of credit with Federal Bank, Colson can borrow up to $386,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year. Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank's prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent) annual interest on $81,000 for the month of January. Month January February March April Amount Borrowed or (Repaid). $ 81,000 117,900 (24,400) 27,600 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. b. Compute the amount of Colson's liability at the end of each of the first…
Honesty Company is exploring to issue a financial instrument next year. They are researching for a reasonable interest rate to offer. The financial instrument is expected to cover for 180 days. Government Treasury Bills are being offered with the following rates: 30 day – 1.5%; 60 day – 2%; 90 day – 2%; 180 day – 2.50%; and 360 day – 3%. Inflation was reported at 1.2%. Honesty must be able to safeguard at least 3% of the risk for this issuance.What is the appropriate interest rate (round off your answer to two decimal places)?
Ochoa Bros. received $2 million as loan proceeds from a large bank on April 30, 2015. The market interest rate of 8% per annum is to be paid annually and the principal is to be repaid in 10 years' time if not put earlier by the bank. The bank holds a put option on the debt requiring redemption of the loan after seven years. An amount of $200,000 plus the original principal of $2 million would be repaid if the bank exercises the put. Ochoa agreed to the put option in exchange for relaxed debt covenants. Believing interest rates will fall, on April 30, 2018, Ochoa entered into an interest rate swap (at no cost). Ochoa does not opt for hedge accounting. Swap Terms Notional Amount: $2,000,000 Interest Rate on Swap: Prime + 2% payable annually Current prime rate: 6% Interest Reset Date: Every April 30 Term: 4 years Cost to enter swap: zero Additional information: RESET DATE SWAP VALUE PRIME RATE April 30, 2019 $(75,267) 7.5% April 30, 2020 $(86,198) 8.5% April 30, 2021 $zero 6%…
The Electric Car Corporation borrowed $3,000,000 from the Bank of Walnut Creek on October 1, 2021. The loan was from an SBA (Small Business Administration) program that required interest only payments annually at the low rate of 1.75%. At the end of 5 years, on October 1, 2026 the entire loan of $3,000,000 must be repaid. In the event it is not repaid, the interest rate of 1.75% will be increased retroactively at a rate of 7.5%. In order to assure that the loan can be repaid on October 1, 2026, the Chief Financial Officer wants to set up a special fund to contribute to each and every year in order to have sufficient funds to repay the loan in full on October 1, 2026. The Investment firm of J. Edward and Associates of Emeryville, California has an investment fund available that has an annual fixed return of 5%. The Electric Car Corporation wants to start making an annual deposit to the fund beginning in one year starting on October 1, 2022, and for each of the next three years of…
D6) Finance URGENT!! demonstrate that the effective cost of funds for a $40 million 90-day bank bill issue in April is the forward rate established in June (when 30 August BAB futures are sold at 97.45), rather than the BBSW of 3.05% when the bills are issued in june
National Food Services, Inc., borrowed $4 million from its local bank on January 1, 2018, and issued a 4-yearinstallment note to be paid in four equal payments at the end of each year. The payments include interest at the rateof 10%. Installment payments are $1,261,881 annually.Required:What would be the amount(s) related to the note that National would report in its statement of cash flows for theyear ended December 31, 2018?

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