Tokyo Corporation must pay its supplier P500,000. Tokyo Corp's bank has advertised a 270-day loan with simple interest at a rate of 12 percent. On business loans, the bank requires a 20 percent compensating balance. What is the loan's effective annual rate (rEAR) if Tokyo Corporation currently holds no funds with the lending bank? In your calculations, assume that a year has 360 days.
Tokyo Corporation must pay its supplier P500,000. Tokyo Corp's bank has advertised a 270-day loan with simple interest at a rate of 12 percent. On business loans, the bank requires a 20 percent compensating balance. What is the loan's effective annual rate (rEAR) if Tokyo Corporation currently holds no funds with the lending bank? In your calculations, assume that a year has 360 days.
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...
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Tokyo Corporation must pay its supplier P500,000. Tokyo Corp's bank has advertised a 270-day loan with simple interest at a rate of 12 percent. On business loans, the bank requires a 20 percent compensating balance. What is the loan's effective annual rate (rEAR) if Tokyo Corporation currently holds no funds with the lending bank? In your calculations, assume that a year has 360 days.
a. 12.00%
b. 11.35%
c. 15.00%
d. 11.25%
e. 15.27%
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