our firm needs to borrow $1.0 million for one year. The firm has no other short term borrowings and it's combined state and federal tax rate is 25%. Your banker offers several lending alternatives. Which one will you choose?   Select one:   A)6.50% simple interest with a 20.00% compensating balance   b) . 8.25% simple interest    c) . 7.00% simple interest with a 15.00% compensating balance   d) . 8.25% discount interest

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A: Quarterly interest rate = 0.50%Compounding frequency, m = 4The effective annual interest rate is

Q: The FFR is an important influence on other interest rates, like those on car loans and home loans,…

A: Future Value: The future value is the amount that will be received at the end of a certain period.…

Q: The Nguyens are thinking of buying a home for $121,000. A potential lender advertises an 80%,…

A:

Q: A lender providing a loan of S5.5 million requires semi-annual payment of interest at a nominal rate…

A:

Q: Your current bank is paying 6.25% simple interest rate. You can move your savings account to Harris…

A: Effective rate is the rate after consdering the impact of compounding on the interest due to which…

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A: The discount loan refers to a loan where the amount to be repaid is fixed and the amount provided to…

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A: A mortgage is a covered loan taken out to purchase a property with the property itself acting as…

Q: You just took out a​ variable-interest-rate consumer loan set at 33 percent over prime. After 1​…

A: The objective of the question is to calculate the new interest rate on a variable-interest-rate…

Q: suppose that you decide to borrow $15,000 for a new car. you can select one of the following loans,…

A: a.Loan ALoan Amount (pv) = $15,000Interest Rate (rate) = 5.9%Time Period = 3 YearsNumber of Payments…

Q: You would like to buy a house that costs $350,000. You have $50,000 in cash that you can put down on…

A: Balloon payment calculation:

Q: You are considering a $75,000, 30-year mortgage to purchase a new home. The bank at which you have…

A: Mortgage payments are the regular monthly payments made to cover the amount borrowed as a loan…

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A: A loan is an agreement where a party forwards a sum to another party in return for that sum being…

Q: Barbie is going to borrow $5,000 to help write a book.  The loan is for one year and the money can…

A: Option 1: 1 year loan borrowed at prime rate = 11%Effective interest cost = 11%Option 2: 1 year loan…

Q: where a $70,000 loan could be assumed at a 9 percent rate with a remaining term of 15 years and…

A: The question is based on the concept of calculation of present value of periodic loan payments by…

Q: a. As part of your company’s financial planning, you plan to buy a car for your new executive, which…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Zachary Porter of Abilene, Kansas, is contemplating borrowing $10,000 from his bank. The bank could…

A: Add-on Method As per this method, the interest is calculated at the start of the loan. It is then…

Q: Complete the following table. (Note: Round your answers to the nearest dollar.) Principal Finance…

A: The annual percentage rate is a conventional way to quantify the whole cost of borrowing in…

Q: Suppose your firm is seeking a seven - year, amortizing $770,000 loan with annual payments, and your…

A: Interest rate refers to the charge that is being charged by the lender from the borrower on the loan…

Q: a) You want to receive $ 15 million in 30 years for a major purchase. If a financial institution…

A: According to bartleby guidelines , if multiple questions are asked , then 1st question needs to be…

Q: Bank A pays 5% interest compounded annually on deposits, while Bank B pays 4.25% compounded daily.…

A: Given,  Bank A pays 5% compounded annually Bank B pays 4.25% compounded daily.

Q: You want to buy a new sports coupe for $77,500, and the finance office at the dealership has quoted…

A: Compound = n = Monthly = 12Present Value = pv = $77,500Interest rate = r = 5.9 / 12Time = t = 48

Q: The price of a condominium is $127,000. The bank requires a​ 5% down payment and one point at the…

A: Required down payment = $127,000 * 5% = $6350 Amount of Mortgage = $127000 * 95% = $120650 One point…

Q: You would like to buy a house that costs $350,000. You have $50,000 in cash that you can put down on…

A: PV is the current worth of cash flows that are expected to occur in the future.

Q: Suppose your firm is seeking a seven- year, amortizing $870,000 loan with annual payments and your…

A: Alternatively, we can also use the excel function.Calculation of annual payments on loan without a…

Q: Question 29 A borrower is borrowing $300,000 with a 30 year term, monthly payments, and has the…

A: The effective borrowing cost refers to the actual interest rate that the borrower pays for borrowing…

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A: The provided information are: Amount being borrowed from bank = $10,000 Rate of interest (i) = 7% =…

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A: the real interest rate equals the nominal interest rate minus the expected inflation rate.…

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A: APR is an annual percentage rate and this is a rate based on the nominal rate and compounding of…

Q: ou have agreed to loan some money to a friend at a simple interest rate of 62% your friend needs a…

A: Rate = 62% Principal = $1470 Maturity Value =$3200 Interest = $3200 -$1470 Interest = $1730

Q: 1). At what property price is it optimal to default on the loan when the borrowing rate is 1%, 5%…

A: A loan default occurs when a borrower fails to meet the agreed-upon terms and conditions of a loan…

Q: Which of the following statements is most correct? The first payment under a 3-year, annual payment,…

A: The time value of money is the concept that a sum of money is worth more right now than it will be…

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A: Interest on discount rate = 8.5%  Repayment Amount = $225,000 The initial amount will be equal to…

Q: Quantitative Problem: You need $18,000 to purchase a useel car. Your wealthy uncle is willing to…

A: When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

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Q: The Nguyens are thinking of buying a home for $121,000. A potential lender advertises an 80%,…

A: Given, 80% of downpayment from 121000 = $96800 n = 30 Years    = 30*12 =360 Months Interest =…

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.