The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 26 basis points (0.26 percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.16 percent and a minimum of 1.79 percent. Calculate the rate of interest for weeks 2 through 10. Date LIBOR Week 1 1.98% Week 2 1.59% Week 3 1.52% Week 4 1.32% Week 5 1.65% Week 6 1.67% Week 7 1.71% Week 8 1.86% Week 9 1.88%
The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 26 basis points (0.26 percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.16 percent and a minimum of 1.79 percent. Calculate the rate of interest for weeks 2 through 10. Date LIBOR Week 1 1.98% Week 2 1.59% Week 3 1.52% Week 4 1.32% Week 5 1.65% Week 6 1.67% Week 7 1.71% Week 8 1.86% Week 9 1.88%
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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(Related to Checkpoint 9.1) (Floating-rate loans) The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was
26
basis points
(0.26
percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of
2.16
percent and a minimum of
1.79
percent. Calculate the rate of interest for weeks 2 through 10.|
Date
|
LIBOR
|
|---|---|
|
Week 1
|
1.98%
|
|
Week 2
|
1.59%
|
|
Week 3
|
1.52%
|
|
Week 4
|
1.32%
|
|
Week 5
|
1.65%
|
|
Week 6
|
1.67%
|
|
Week 7
|
1.71%
|
|
Week 8
|
1.86%
|
|
Week 9
|
1.88%
|
(Click
on the icon
spreadsheet.)
The rate of interest for week 2 is
nothing%.
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