Pendragon Inc. has an operating loan with a balance of $52,000 on September 1 with interest set at prime + 4.75%. On the first of every month the operating loan requires repayment of the accrued interest only. The current prime rate is 4.75% and will decrease to 4.25% on October 7. On September 15, it has a 270-day $20,000 GIC with 3.8% interest maturing. On October 15, it has a 320-day $18,000 GIC with 3.68% interest maturing. It will use these maturing investments to pay down its operating loan. Construct a repayment schedule from September 1 to November 1 only.
Pendragon Inc. has an operating loan with a balance of $52,000 on September 1 with interest set at prime + 4.75%. On the first of every month the operating loan requires repayment of the accrued interest only. The current prime rate is 4.75% and will decrease to 4.25% on October 7. On September 15, it has a 270-day $20,000 GIC with 3.8% interest maturing. On October 15, it has a 320-day $18,000 GIC with 3.68% interest maturing. It will use these maturing investments to pay down its operating loan. Construct a repayment schedule from September 1 to November 1 only.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Pendragon Inc. has an operating loan with a balance of $52,000 on September 1 with interest set at prime + 4.75%. On the first of every month the operating loan requires repayment of the accrued interest only. The current prime rate is 4.75% and will decrease to 4.25% on October 7. On September 15, it has a 270-day $20,000 GIC with 3.8% interest maturing. On October 15, it has a 320-day $18,000 GIC with 3.68% interest maturing. It will use these maturing investments to pay down its operating loan. Construct a repayment schedule from September 1 to November 1 only.
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