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 8 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 14 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 14 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 1 year agoRelated Solutions
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 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
your business,...
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
pay you back $13,250 in a year. If the cost of capital of this
investment opportunity is 9% what is its NPV? Should you undertake
the investment opportunity? calculate the IRR and use it to
determine the maximum deviation allowable in the cost of capital
estimate to leave the decision unchanged.
If the cost of capital of this investment opportunity is 12
% ------
What is its NPV?...
Suppose that you borrow $10,000 today from Falcon Savings & Loan (S&L) and promise to pay...
Suppose that you borrow $10,000 today from Falcon Savings &
Loan (S&L) and promise to pay this loan back in 6 years with a
total payment (principal plus interest) of $14,500. What is the
effective annual interest rate that the S&L is charging? Assume
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...
Suppose that you borrow $10,000 today from Falcon Savings &
Loan (S&L) and promise to pay this loan back in 6 years with a
total payment (principal plus interest) of $15,713. What is the
effective annual interest rate that the S&L is charging? Assume
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.
You borrow $10,000 and agree to pay back $12,000 in 3 years.What is the annual...
You borrow $10,000 and agree to pay back $12,000 in 3 years.
What is the annual interest rate you're being charged?
Suppose you borrow from a bank $1,997.26 today (t=0). You agree to pay back $3,943.65 in...
Suppose you borrow from a bank $1,997.26 today (t=0). You agree
to pay back $3,943.65 in 5 years (t=5). The interest rate (%) that
the bank charge you is closest to ________%. Input your
answer without the % sign and round your answer to two decimal
places.
You borrow $10000 for a capital equipment at 6% interest. If you plan to pay back...
You borrow $10000 for a capital equipment at 6%
interest. If you plan to pay back
2000/yr how long will it take to pay off the debt ? What is the
amount of the final payment?
You are the recipient of a gift that will pay you $25,000 one year from now...
You are the recipient of a gift that will pay you $25,000 one
year from now and every year thereafter for the following 24 years.
The payments will increase in value by 2.5 percent each year. If
the appropriate discount rate is 8.5 percent, what is the present
value of this gift? STEPS FOR BAII PLUS CALCULATOR PLEASE!
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