QUESTION 16 A Bank lends a Nesta company. R500 000 for one year at 6.48% and requires a compensating balance of 10% of the face value of the loan. The effective annual interest rate associated with the loan is ... 7.00%. 7.20%. 8.00%. 8.90%.

QUESTION 16 A Bank lends a Nesta company. R500 000 for one year at 6.48% and requires a compensating balance of 10% of the face value of the loan. The effective annual interest rate associated with the loan is ... 7.00%. 7.20%. 8.00%. 8.90%.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 4P: Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual...

See similar textbooks

Related questions

Q: You have taken a personal loan from Bank Muscat for 15,000 OMR and charged with an interest rate of…

A: Loan Amortization Table is as under -

Q: Estimate the expected return for the bank from the loan commitment?

A: 1.1 Upfront Fee: - Sanctioned Loan Amount = Rs. 200,000 - Upfront Fee Rate = 0.05% (0.0005 as a…

Q: Petir Bank has awarded Pelangi Berhad a loan of RM500,000. The interest rate was charged at a rate…

A: Principal (P) = RM500,000 Interest rate (r) = 12% Compensating balance (c) = 15%

Q: QUESTION 6 You have a 7-year loan of $80,000. The borrower will pay $8,500 at the end of Year 1,…

A: Loan amount = $80,0001st year payment = $9,5002nd year payment = $8,5003rd year payment =…

Q: What is the outstanding balance of the loan after the 2nd year

A: Compound interest is the amount of interest charged on interest. In this method the interest…

Q: 5. A $200 loan is offered with an annual simple interest rate of 6 percent. How much would the…

A: Solution:- When a loan is taken, the lender charges interest on it and in simple interest method,…

Q: Jaspreet received a 15 year loan of $300,000 to purchase a house. The interest rate on the loan was…

A: Monthly payment refers to an amount that is paid every month for the repayment of a loan amount…

Q: An interest problem: Suppose $1000 is invested in an account paying interest at a continuous rate of…

A: The accumulated value after one year with given continuous rate is calculated below:

Q: A LOAN OF P80,000 IS MADE FOR A PERIOD OF 18 MONTHS AT A SIMPLE INTEREST RATE OF 10%. WHAT FUTURE…

A: Simple interest measures the interest payment on the principal amount for a period of time without…

Q: A bank originates a 30 year Fully Amortizing FRM at an annual interest rate of 5% with monthly…

A: Here, Interest earned by Bank on FRM is 5% Interest Paid by Bank on Borrowings is 6%

Q: A loan of $20,000 is to be amortized in 10 level annual payments. The interest rate for the first 3…

A: Loan =$ 20,000 Interest Rate for first 3 years =4% Interest rate for next 7 years =6%

Q: The bank is offering to sell 6-month certificates of deposit for $9800. At the end of 6 months, the…

A: Certificate of deposits are issued by the banks at discount and that discount is interest rate on…

Q: Problem 5 EFFECTIVE INTEREST RATE. Charles Corporationb annual interest. Principal and interest is…

A: The effective annual rate of interest is the actual or the real rate of interest paid or received…

Q: 13. Francis Company's bank require s a compensating balance of 20% on a P100,000 loan. If the…

A: Compensating Balance: A compensating balance is a minimum amount of bank account balance that the…

Q: Riverside Bank offers to lend you $50,000 at a nominal rate of 6.5%, compounded monthly. The loan…

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

Q: How long can a loan of BRL 55,000.00 be repaid in a single payment of BRL 110,624.80 if the compound…

A: Future Value = Present Value * ( 1 + Interest rate) time period

Q: A LOAN OF P80,000 IS MADE FOR A PERIOD OF 18 MONTHS AT A SIMPLE INTEREST RATE OF 10%. WHAT DUE AT…

A: Loan amount = P80,000 Annual interest rate = 0.10 or 10% Annual period = 1.5 (i.e. 18 / 12) Amount…

Q: A bank makes a 30 year Fully Amortizing, Fixed Rate Mortgage (FRM) for $2,000,000 at an annual…

A: Here, Value of Loan is $2,000,000 Annual Interest Rate is 4.125% Time Period of Loan is 30 years…

Q: company has obtained a short-term bank loan of P500,000 at an annual interest rate of 6 with a…

A: In this we have to determine effective interest rate.

Q: A bank charges an interest rate of interest is 6% compounded annually. A customer takes a loan of…

A: In order to find the outstanding balance one has to deduct the payment from the loan amount.

Q: a) A bank offers to lend you K1,000 if you sign a note to pay K1,610.50 at the end of 5 years. What…

A: As multiple questions have been asked, only the first question will be answered as per the…

Q: What is the effective interest rate of a simple discount note for $27,100, at an ordinary bank…

A: Effective interest rate is the rate charged on the borrowed amount on an annual basis considering…

Q: QUESTION 1 a. NewBank started its first day of operations with ¢ó million in capital. ¢100 million…

A: Share Capital ₡6 million Deposits from customers ₡100 million The commercial loan of ₡25 million…

Q: A BANK CHARGES 15% SIMPLE INTEREST ON A P500.00 LOAN. HOW MUCH WILL BE REPAID IF THE LOAN IS PAID…

A: Present Worth P 500.00 Interest Rate 15% Time Period (Months) 3

Q: A bank offers a lending rate of 10% p.a. compounded quarterly. What figure would they quote if they…

A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…

Q: for an $8000 loàn. Which option should the customer choose to pay the least amount of interest? a.…

Q: A bank makes a 30 year Fully Amortizing FRM for $2,000,000 at an annual interest rate of 4.125%…

A: Here, Annual Interest Rate on Loan is 4.125% Time Period of Loan is 30 years FRM Amount is…

Q: A bank makes an amortizing loan of $200,000 with a maturity of 8 years and equal payments every…

Concept explainers

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.

Question

QUESTION 16

A Bank lends a Nesta company. R500 000 for one year at 6.48% and requires a compensating balance of 10% of the face value of the loan. The effective annual interest rate associated with the loan is ...

7.00%.
7.20%.
8.00%.
8.90%.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Jaspreet received a 15 year loan of $300,000 to purchase a house. The interest rate on the loan was 3.70% compounded semi-annually. a. What is the size of the monthly loan payment? $0.00 Round to the nearest cent Question 5 of 6 b. What is the balance of the loan at the end of year 2? $0.00 Round to the nearest cent c. By how much will the amortization period shorten if Jaspreet makes an extra payment of $30,000 at the end of year 2? SUBMIT QUESTION
Problem -2-: You have taken a personal loan from Bank Muscat for 15,000 OMR and charged with an interest rate of 6% per year. The repayment is scheduled for annually to a period of 4 years. Fill in the missing numbers in the loan amortization schedule below: End of Year Payment Interest Principal Ending Balance 0 - - - 15,000 1 4,329.87 900 …. 11,570.13 2 …. …. 3,635.66 …. 3 …. 476.07 …. 4,080.67 4 …. …. 4,085.01 ≈ 00
QUESTION 6 You have a 7-year loan of $80,000. The borrower will pay $8,500 at the end of Year 1, $9,500 at the end of Year 2, and $7,500 at the end of Year 3, plus X at the end of each year from Year 4 through Year 7. X is the fixed but unspecified cash flow. The loan's rate is 9%. What is X? O $22,3617.01 O $21,954.25 $23,350.31 O $19,411.02
QUESTION 1 A bank makes a 30 year Fully Amortizing, Fixed Rate Mortgage (FRM) for $2,000,000 at an annual interest rate of 4.125% compounded monthly, with monthly payments. What is the market value of this loan after 7 years of payments if the annual interest rate for this loan is 10% compounded monthly? O A. $ 680,688.05 O B. $1,045,425.62 OC. $1,726,113.67 O D.$1,101,017.63
# 18 Petir Bank has awarded Pelangi Berhad a loan of RM500,000. The interest rate was charged at a rate of 12 percent. The facility will be available for seven months. If the loan agreement requires a 15 percent compensating balance, compute the effective interest rate of the loan. Answer O 11.5 percent O 13.5 percent O 12 percent O 14.12 percent
QUESTION 6 A bank originates a 30 year Fully Amortizing FRM at an annual interest rate of 5% with monthly compounding and monthly payments. If 10 years later, the bank borrows at 6%, what is this bank's Net Interest Margin (NIM) on this FRM? O A. 5.00% O B. -11.00% OC.-1.00% O D.6.00%
An interest problem: Suppose $1000 is invested in an account paying interest at a continuous rate of 6% a year. What is the A.P.R. for this loan? A. 6% B. 6.18% C. 5.82% D. 1.06
A lender engages in a 15-day $1,000,000 reverse repo at a rate of 2.50%. The haircut is 2%. The current market value of the loan is $980,000. What rate of return did the lender earn on annualized basis? Use 360-day for annualization. A $1,000.42 B $810.63 C $466.86 D $880.37
aa.7
Q1 A company plans to borrow RM3,000,000 for a year. The stated interest rate is 10 percent. Compute the effective interest rate under each of these assumptions. Each part stands alone. a) The interest is discounted. b) There is an 18 percent compensating balance requirement. c) It is a 12 – month instalment loan. d) Assume the interest is only RM75,000 and the loan is for 120 days.
13. Francis Company's bank require s a compensating balance of 20% on a P100,000 loan. If the stated interest of the loan is 7% , what is the effective cost of the loan?
Brothers Corporation borrows P70,000.00, annual interest rate of 19% is deducted in advance. What is the amount of proceeds the company will receive at the time of the loan and what is the effective interest rate choose the letter of the correct answera. P13,300.00 and 19%b. P26,700.00 and 19%c. P13,300 and 23.5%d. P23,300.00 and 19%e. P56,700.00 and 23.5%