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- An FI has estimated the following annual costs for its demand deposits: management cost per account = $150, average account size = $1600, average number of cheques processed per account per month = 75, cost of clearing a cheque = $0.10, fees charged to customer per cheque = $0.05, and average fee charged per customer per month = $15. (a) What is the implicit interest cost of demand deposits for the FI? (b) If the FI has to keep an average of 8 per cent of demand deposits as required reserves with the RBA paying no interest, what is the implicit interest cost of demand deposits for the FI? (c) What should be the per-cheque fee charged to customers to reduce the implicit interest costs to 3 per cent? Ignore the reserve requirements.An FI has estimated the following annual costs for its demand deposits: management cost per account = $150, average account size = $1400, average number of cheques processed per account per month = 65, cost of clearing a cheque = $0.10, fees charged to customer per cheque = $0.05, and average fee charged per customer per month = $10.(a) What is the implicit interest cost of demand deposits for the FI?(b) If the FI has to keep an average of 6 per cent of demand deposits as required reserves with the Central Bank paying no interest, what is the implicit interest cost of demand deposits for the FI?(c) What should be the per-cheque fee charged to customers to reduce the implicit interest costs to 2 per cent? Ignore the reserve requirements.Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan.
- The Blake Company has an outstanding bank loan of P400,000 at an interest rate of 12%. The company is required to maintain a 20% compensating balance in its checking account. What is the effective interest cost of the loan? Assume that the company would not normally maintain this average amount? Format: 11%Suppose a credit card has anAPR of 30.07% and changes itscompounding period frommonthly to daily. What willhappen to the effective interestrate charged by the credit card?A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of 5%. What is the effective cost to the borrower?
- 8. Suppose that the balance of a certain credit card is P43,744.53. The credit card company charges 3.5% per month. How much is the total balance owed to the credit card company? 9. A buyer purchased an item worth P10,000 with no down payment at 0.85% per month for 24 months. What is the monthly payment? How much is the finance charge? EvaluateAssume the following facts about a firm that borrows by pledging its receivables Average balance of accounts receivable. Annual receivables turnover. Administrative fee charged on all new receivables. Interest rate on outstanding loans Percent of receivables accepted $60,000 6x 1.25% 15% 80% What is the effective cost of financing stated as an annual rate? Batangas Company estimates its total cash outlays at $160 million during the coming year. The company normally spends $30 to transfer cash from marketable securities to cash in bank and vice versa. The marketable securities portfolio currently earns 4% annual rate of return. Requirements: 1. Optimal transaction size. 2. Average cash balance. 3. Total annual cost of cash if the company adopts the optimal transaction size. 4. Minimum and maximum cash balances. 5. Assume that the company has to keep $100,000 balance in the bank as safety cash. Repeat your solution for the first four requirements.Salma Corporation sells on terms of net/90. Their accounts receivable are on average 20 days past due. If annual credit sales are P800,000, what is the company’s average investment in accounts receivable? choose the letter of correct answera. P44,444.00b. P144,444.00c. P224,444.00d. P244,444.00e. P344,444.00
- a) Explain the significance of financing with accounts payable. b) Explain (including computations) the rationale of taking a cash discount, such as 2/15, n/40. c) Additionally, determine the approximate balance of accounts payable, if a company stretches its payables to 60 days and on average, they make purchases of $1,000,000 per day from their vendors. d) Explain what the stretching accomplishes if the vendors should be paid in 40 days.A bank is offering a loan of $20,000 with an interest rate of 9%, payable with monthly payments over a 4-year period. a. Calculate the monthly payment required to repay the loan. b. This bank also charges a loan fee of 4% of the amount of the loan, payable at the time of the closing of the loan (that is, at the time the borrower receives the money). What effective interest rate is the bank charging?Bank A pays 2% interest compoundedannually on deposits, while Bank B pays 1.75% compounded daily.a. Based on the EAR (or EFF%), which bank should you use?b. Could your choice of banks be influenced by the fact that you might want to withdraw your funds during the year as opposed to at the end of the year? Assume that your funds must be left on deposit during an entire compounding period in order to receive any interest.