None You've worked out a line of credit arrangement that allows you to borrow up to $42 million at any time. The interest rate is 43 percentper month. In addition, 5 percent of the amount that you borrow must be deposited in a non-interest-bearing account. Assume thatyour bank uses compound interest on its line of credit loans.a. What is the effective annual interest rate on this lending arrangement?Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.b. Suppose you need $30 million today and you repay it in 6 months. How much interest will you pay?Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.a. Annual interest rateb. Interest paid5.57 %

Step 1: Computation of Effective Annual Interest Rate: As per the given data: Monthly interest rate…

Answered: You've worked out a line of credit…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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You've worked out a line of credit arrangement that allows you to borrow up to $70 million at any time. The interest rate is .391 percent per month. In addition, 5 percent of the amount that you borrow must be deposited in a noninterest - bearing account. Assume that your bank uses compound interest on its line of credit loans. What is the effective annual interest rate on this lending arrangement? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.1 Suppose you need $15 million today and you repay it in eight months. How much interest will you pay? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1, 234, 567.89.
You've worked out a line of credit arrangement that allows you to borrow up to $70 million at any time. The interest rate is .375 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans. a. What is the effective annual interest rate on this lending arrangement? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.1 b. Suppose you need $25 million today and you repay it in eight months. How much interest will you pay? Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to 2 decimal places, e.g., 1,234,567.89. a. Effective annual rate b. Total interest paid %
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