Question
In: Finance
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $ 154 comma 000...
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $ 154 comma 000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.9 % subject to a 10.4 % compensating balance. (Note: Weathers currently maintains $ 0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.9 % with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate the effective annual rate of interest on each loan. b. What could Weathers do that would reduce the effective annual rate on the State Bank loan?
Solutions
jeff jeffy answered 7 months agoRelated Solutions
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $ 151 comma 000$151,000...
Compensating balance versus discount loan Weathers Catering
Supply, Inc., needs to borrow
$ 151 comma 000$151,000
for
66
months. State Bank has offered to lend the funds at an annual
rate of
9.4 %9.4%
subject to a
10.4 %10.4%
compensating balance.
(Note:
Weathers currently maintains
$ 0$0
on deposit in State Bank.) Frost Finance Co. has offered to
lend the funds at an annual rate of
9.4 %9.4%
with discount-loan terms. The principal of both loans would be
payable at...
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $ 145,000 for 6...
Compensating balance versus discount loan Weathers Catering
Supply, Inc., needs to borrow $ 145,000 for 6 months. State Bank
has offered to lend the funds at an annual rate of 9.1 % subject to
a 9.9 % compensating balance. (Note: Weathers currently
maintains $ 0 on deposit in State Bank.) Frost Finance Co. has
offered to lend the funds at an annual rate of 9.1 % with
discount-loan terms. The principal of both loans would be payable
at maturity as...
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