Question
In: Finance
You plan to borrow $10,000 from the bank to pay for inventories for a gift shop...
You plan to borrow $10,000 from the bank to pay for inventories for a gift shop you have just opened. The bank offers to lend you the money at 10 percent annual interest for the 6 months the funds will be needed (assume a 360-day year).
a. Calculate the annualized rate of interest on the loan.
b. In addition, the bank requires you to maintain a 16 percent compensating balance in the bank. Because you are just opening your business, you do not have a demand deposit account at the bank that can be used to meet the compensating-balance requirement. This means that you will have to put 16 percent of the loan amount (which you had planned to use to help finance the business) in a checking account. What is the cost of the loan now?
c. In addition to the compensating-balance requirement in part b, you are told that interest will be discounted. What is the annualized rate of interest on the loan now
Solutions
jeff jeffy answered 6 months agoRelated Solutions
You plan to borrow $10,000 from the bank to pay for inventories for a gift shop...
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for a gift shop you have just opened. The bank offers to lend you
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You plan to borrow $40,000 from the bank to pay for inventories for a gift shop...
You plan to borrow $40,000 from the bank to pay for inventories
for a gift shop you have just opened. The bank offers to lend you
the money at 14 percent annual interest for the 3 months the funds
will be needed (assume a360-day year).
a. Calculate the annualized rate of interest on the loan.
b. In addition, the bank requires you to maintain a 15 percent
compensating balance in the bank. Because you are just opening
your business, you...
You plan to borrow $50000 from the bank to pay for inventories for a gift shop...
You plan to borrow $50000 from the bank to pay for inventories
for a gift shop you have just opened. The bank offers to lend you
the money at 9 percent annual interest for the
3 months the funds will be needed (assume a 360-day year).
a. Calculate the annualized rate of interest on the loan.
b. In addition, the bank requires you to maintain a 20 percent
compensating balance in the bank. Because you are just opening
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Your brother wants to borrow 10,000 from you. He has offered to pay you back $13,250...
Your brother wants to borrow 10,000 from you. He has offered to
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If the cost of capital of this investment opportunity is 12
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Suppose that you borrow $10,000 today from Falcon Savings &
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monthly compounding. Do not round at intermediate steps in your
calculation. Express your answer in percent. Round to two decimal
places. Do not type the % symbol.
Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay...
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calculation. Express your answer in percent. Round to two decimal
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