Uncle Ben InC. arranged a P9,000,000 revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 8% during the year. If the firm borrowed P7,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was the effective cost of the agreement? (Please answer this percentage in amount with two decimal points e.g. xx.xx; do not denote percentage anymore)
Uncle Ben InC. arranged a P9,000,000 revolving credit agreement with a group of banks. The firm paid an annual commitment fee of 0.5% of the unused balance of the loan commitment. On the used portion of the revolver, it paid 1.5% above prime for the funds actually borrowed on a simple interest basis. The prime rate was 8% during the year. If the firm borrowed P7,000,000 immediately after the agreement was signed and repaid the loan at the end of one year, what was the effective cost of the agreement? (Please answer this percentage in amount with two decimal points e.g. xx.xx; do not denote percentage anymore)
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
Related questions
Question
During computation, you may round your integer data to two decimal places and your percentages and present value factors to four decimal places.
Transcribed Image Text:Uncle Ben Inc. arranged a P9,000,000
revolving credit agreement with a group
of banks. The firm paid an annual
commitment fee of 0.5% of the unused
balance of the loan commitment. On
the used portion of the revolver, it paid
1.5% above prime for the funds actually
borrowed on a simple interest basis.
The prime rate was 8% during the year.
If the firm borrowed P7,000,000
immediately after the agreement was
signed and repaid the loan at the end of
one year, what was the effective cost of
the agreement? (Please answer this
percentage in amount with two decimal
points e.g. xx.Xx; do not denote
percentage anymore)
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!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education