Your company has arranged a revolving credit agreement for up to $71 million at an interest rate of 1.40 percent per quarter. The agreement also requiresyour company to maintain a compensating balance of 5 percent of the unused portion of the credit line, to be deposited in a noninterest-bearingaccount. Your company's short-term investment account at the same bank pays an interest rate of .54 per quarter. What is the effective annual interestrate if your company borrows $36 million for one year?

Effective interest rate refers to the rate of interest that is being charged on the borrowed amount…

Answered: our company has arranged a revolving…

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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Similar questions

Cliff Capital Corporation (CCC) is taking out a new 2-year bank loan for $100,000 at 6% interest (APR monthly compounding). The bank charges 1% closing fees on the loan. If CCC pays off the loan in equal monthly installments, then what is the effective annual interest rate of this loan? Select one: a. 6.17% b. 6.67% c. 6.99% d. 7.22% e. None of the above.
Your company has agreed to a $340 million fixed-commitment line of credit. The loan agreement calls for your company to pay 1.41 percent per quarter on any funds borrowed and maintain a 6 percent compensating balance on any funds borrowed at zero percent interest. What is the effective annual interest rate on this line of credit? Multiple Choice O O O O 6.13% 5.12% 5.76% 4.94% 5.94%
Suppose for its deposit accounts Simplil Financial is offering to pay interest at a rate of 0.25% per month with monthly compounding, but Tangerine is offering to pay interest at a rata of 0.75% per quarter with quarterly compounding. (One quarter is equal to three months.) Which financial institution is offering the higher rate? The higher rate is being offered by Simplii Financial in decimal form is form is. (Round to six decimal places.) Show Transcribed Text ▼because the effective annual rate of and the effective annual rate of Tangerine in decimal
A bank has a special deal that if a customer agrees to keep the money with the bank for 2 years, the bank will credit interest on the account at a nominal annual interest rate of 1% compounded quarterly for the first quarter, 2% compounded quarterly for the second quarter, and so on, with the nominal annual rate increasing by 1% each quarter until it is an nominal annual rate of 8% compounded quarterly. Over the two-year period, what is the EAR on this bank account?
Bank A offers you a loan at 5.76% compounded 2 times a year. Bank B offers to loan you the same amount at 0.10% less than the rate offered by Bank A but compounded twice as often as the Bank A rate is. Which bank's loan should you accept? As your answer, enter the effective rate (in percent, to two decimal places at least) offered by the bank whose loan you should accept.
A company receives a 5-year $100 million loan commitment from Wells Fargo at a fixed rate of 4.5%. The up-front commitment fee is 40 basis points and the unused portion of the loan is charged 15 basis points. The bank borrows a total of $45 million at the beginning of the year and none thereafter. The following is true, except: A The interest paid on the drawdown amount for the full year is $2,025,000. B The interest rate paid on the drawdown amount for the full year is 4.90% C The fee for the loan commitment for the full year is $400,000. D The fee for the unused portion of the loan commitment for the full year is $82,500
Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan (principal plus interest) must be repaid at the end of the year. Midwest Bank also offers to lend you the $50,000, but it will charge an annual rate of 7.0%, with no interest due until the end of the year. How much higher or lower is the effective annual rate charged by Midwest versus the rate charged by Riverside? a. b. C. d. e. 0.52% 0.44% 0.36% 0.30% 0.24%
Round to the nearest cent as neccessary
Bank A offers you a loan at 8.52% compounded 5 times a year. Bank B offers to loan you the same amount at 0.10% less than the rate offered by Bank A but compounded twice as often as the Bank A rate is. Which bank's loan should you accept? As your answer, enter the effective rate (in percent, to two decimal places at least) offered by the bank whose loan you should accept.
An open loan of $17,000 was taken out today where payments (deposits) and withdrawals can be made freely with a loan rate of 2.8% compounded semi-annually. To reduce the balance of the loan, $1030 was paid 12 months from today, and $5730 was paid 16 months from today. What is the final outstanding balance of the loan 24 months from today (8 months after the last payment)? State your final answer in dollars ($) with two decimals.
ABC Bank offers to lend you $50,000 for one year at a quoted annual rate of 8.46% with each payment at the end of each month. DEF Bank also offers to lend you the same amount at a quoted annual rate of 8.63%, with each payment at the end of each quarter. What is the difference in the effective annual rates charged by the two banks? Group of answer choices 0.12% 0.16% 0.14% 0.10% 0.18%
One bank offers to loan you money at an interest rate of 12% compounded quarterly, and another bank offers to loan you money at 11.8% compounded continuously. Which loan would you prefer, and why?

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