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 6 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...
Inventory financing Raymond Manufacturing faces a liquidity crisislong dashit needs a loan of $125 comma 000...
Inventory financing Raymond Manufacturing faces a liquidity
crisislong dashit needs a loan of $125 comma 000 for 1 month.
Having no source of additional unsecured borrowing, the firm must
find a secured short-term lender. The firm's accounts receivable
are quite low, but its inventory is considered liquid and
reasonably good collateral. The book value of the inventory is
$375 comma 000, of which $150 comma 000 is finished
goods. (Note: Assume a 365-day year.) (1) City-Wide Bank
will make...
On August 31, 2018, Rosebud Floral Supply had a $ 150 comma 000 debit balance in...
On August 31, 2018, Rosebud Floral Supply had a $ 150 comma
000 debit balance in Accounts Receivable and a $ 6 comma 000 credit
balance in Allowance for Bad Debts. During September, Rosebud
made: times Sales on account, $ 580 comma 000. Ignore Cost of
Goods Sold. times Collections on account, $ 613 comma 000. times
Write-offs of uncollectible receivables, $ 9 comma 000.
Journalize all September entries using the allowance method. Bad
debts expense was estimated at 1%...
2. A compensating balance is a term for a loan that usually results in a higher...
2. A compensating balance is a term for a loan that usually
results in a higher effective interest rate than a simple interest
rate. Is there ever a situation when requiring a compensating
balance does not result in a higher effective interest rate than a
simple interest rate for the loan? Explain your answer.
Your firm is considering two one-year loan options for a $ 489 comma 000 loan. The...
Your firm is considering two one-year loan options for a $ 489
comma 000 loan. The first carries fees of 2 % of the loan amount
and charges interest of 3.7 % of the loan amount. The other carries
fees of 1.8 % of the loan amount and charges interest of 4.5 % of
the loan amount.
a. What is the net amount of funds from each loan?
b. Based on the net amount of funds, what is the true...
A loan of $13 comma 000 with interest at 12% compounded semi dash annually is repaid...
A loan of $13 comma 000 with interest at 12% compounded semi
dash annually is repaid by payments of $ 937.00 made at the end of
every three months. (a) How many payments will be required to
amortize the loan? (b) If the loan is repaid in full in 2 years,
what is the payout figure? (c) If paid out, what is the total
cost of the loan? (a) The number of payments required to amortize
the loan is nothing....
You have just taken out a $ 17 comma 000 car loan with a 6 %...
You have just taken out a $ 17 comma 000 car loan with a 6 %
APR, compounded monthly. The loan is for five years. When you make
your first payment in one month, how much of the payment will go
toward the principal of the loan and how much will go toward
interest? (Note: Be careful not to round any intermediate steps
less than six decimal places.)
Consider the following pair of mortgage loan options for a ?$130 comma 000 mortgage. Which mortgage...
Consider the following pair of mortgage loan options for a ?$130
comma 000 mortgage. Which mortgage loan has the larger total cost?
(closing costs? + the amount paid for points? + total cost of?
interest)? By how? much?
Mortgage? A: 20?-year fixed at 7.25?% with closing costs of
?$2400 and 1 point.
Mortgage? B: 20?-year fixed at 5.25?% with closing costs of
?$2400 and 2 points.
Choose the correct answer? below, and fill in the answer box to
complete your...
You need a loan of $140 comma 000 to buy a home. Calculate your monthly payments...
You need a loan of $140 comma 000 to buy a home. Calculate your
monthly payments and total closing costs for each choice below.
Briefly discuss how you would decide between the two choices.
Choice 1: 15-year fixed rate at 7% with closing costs of $1400
and no points. Choice 2: 15-year fixed rate at 6.5% with closing
costs of $1400 and 3 points. What is the monthly payment for
choice 1? $ what (Do not round until the final...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- consider a firm’s desire to invest in its capital stock and answer the following questions: A)...
- In 2009, Nobel-prize winning economist Paul Krugman wrote, “The paradox of thrift is one of those...
- One electrode compartment consists of an aluminum strip placed in a solution of Al(NO3)3, and the...
- Problem #5: A loan of $44,000 is paid off in 36 payments at the end of...
- How many grams of Na2CO3 should be mixed with 5.00 g of NaHCO3 to produce 100...
- Given the following information for a monopolistic competitor: Demand: P = 78 – 5(Q) Marginal revenue:...
- Why does the auto industry prefer uniform (national) standards for automobile emissions as opposed to regionally...
ADVERTISEMENT