The financial managers at Montross Corporation are arranging the financing for working capital requirements for the upcoming year. Montross’s local bank offers a discount interest loan at a quoted (simple) interest rate of 4.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Montross applies for a $200,000 loan with a nine-month term. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. (Fill In) Value Interest payment ________________ Amount of cash received ________________ Annual percentage rate (APR) ________________ Effective annual rate (EAR) ________________ What is the nine-month rate if the bank charges a $100 processing fee? Pick one choice. 3.15% 4.12% 3.05% 2.84%
The financial managers at Montross Corporation are arranging the financing for working capital requirements for the upcoming year. Montross’s local bank offers a discount interest loan at a quoted (simple) interest rate of 4.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Montross applies for a $200,000 loan with a nine-month term. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. (Fill In) Value Interest payment ________________ Amount of cash received ________________ Annual percentage rate (APR) ________________ Effective annual rate (EAR) ________________ What is the nine-month rate if the bank charges a $100 processing fee? Pick one choice. 3.15% 4.12% 3.05% 2.84%
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...
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Computing the cost of a discount interest loan
The financial managers at Montross Corporation are arranging the financing for working capital requirements for the upcoming year. Montross’s local bank offers a discount interest loan at a quoted (simple) interest rate of 4.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Montross applies for a $200,000 loan with a nine-month term.
Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. (Fill In)
|
Value
|
---|---|
Interest payment | ________________ |
Amount of cash received | ________________ |
Annual percentage rate (APR) | ________________ |
Effective annual rate (EAR) | ________________ |
What is the nine-month rate if the bank charges a $100 processing fee? Pick one choice.
3.15%
4.12%
3.05%
2.84%
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