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Trade Credit 20-10. Legacy Enterprises received an invoice from its supplier. The terms of credit were...

Trade Credit

20-10. Legacy Enterprises received an invoice from its supplier. The terms of credit were stated as 3/15, n45. Calculate the effective annual interest rate on the trade credit.

Commercial Paper

20-11. Callaway Krugs issues $2,000,000 in commercial paper for 90 days at a 3.8 percent discount yield. Calculate each of the following.

a.  Dollar amount of the discount

b.  Price of the commercial paper

c.  Effective annual interest rate on the commercial paper

Effective Interest Rate

20-12. Lugash wants to buy a new car. The bank has offered him a $20,000 discount interest loan at 6.5 percent. What is the effective interest rate?

Compensating Balance

20-13. Third National Bank requires that all its borrowers have a compensating balance of 13 percent of the amount borrowed. If you need to take out a small-business expansion loan for $30,000 at 10 percent, what would be your effective interest rate on this one-year loan?

Annualizing Interest Rates

20-14. You are the financial manager for Talc, Ltd., and the owner has just asked you to compute the effective annual interest rate on the loans the company currently has outstanding. The following is a list of these loans:

a.  $50,000; .5% monthly rate, maturity: 1 month

Solutions

Expert Solution

jeff jeffy answered 1 year ago
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