A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of 5%. What is the effective cost to the borrower?
Q: ill receive $9486 at the end of Year 2. At the end of the following two years, he will receive $7971…
A: Future value of the amount include the amount that is being deposited and amount of interest…
Q: Suppose an investor wants to invest $X in a one-month portfolio consisting of ONE risk-free asset…
A: Investors typically cannot "short" risk-free assets, as they are considered safe investments with…
Q: ll Metals, Inc. has a current stock price of $35 share, is expected to pay a dividend of $1.20 in…
A:
Q: a) First, ignore the fact that rrf depends on whether you are long or short the risk-free asset.…
A: Note: This post contains several questions. There are no specific directions regarding the question…
Q: A company plans to issue a 25-year bond with a 12.5% interest rate, issued at a face value of P1,…
A:
Q: Price-Earnings Ratio- What are the three factors that determine a company's price-earnings ratio?
A: Price to earnings ratio is the ratio between the price of the share and the earnings per share. It…
Q: assume the current S&P500 index level is 100 and the risk-free rate is You sell one S&P500 index…
A: In this question we will be calculating and evaluating the return on put option sales.
Q: Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost…
A: Salvage value refers to the residual value, that is, the value at which the equipment can be traded…
Q: Which of the following are major components of a sound financial plan? 1. Estate planning II.…
A: Financial planning is very important aspect in today's time. Under this, funds are being managed and…
Q: 16. In Decembe income, interest percent. The R ROA= M
A: Return on assets is very important profitability ratio and indicates that how much is firm efficient…
Q: Raindeer PLC is a highly profitable electronics company that manufactures a range of innovative…
A: Sensitivity Analysis: Sensitivity Analysis is a tool used in financial analysis to assess how…
Q: An investment promises the following payments: March 3 $1000; March 18 $2000; March 26 $3000. If the…
A: Present value (PV) is the value of a future payment or series of future payments discounted back to…
Q: You are considering an investment in a mutual fund with a 7% load and expense ratio of 0.5%. You can…
A: Answer Load Rate (L) = 7% Expenses Ration (E) = 0.5% CD Rate = 3% Return of Mutual Fund = R Number…
Q: You are considering an investment in Roxie's Bed & Breakfast Corp. During the last year, the firm's…
A: Hi student Since there are multiple subparts, we will answer only first three subparts. Book value…
Q: Closing Costs Credit report Loan origination fee Attorney and notary Documentation stamp Processing…
A: Loan amount The loan amount is the sum of money that you are currently obligated to pay us under…
Q: Assets Cash Receivables (net) Inventory PP & E (net) Patents&Licenses Goodwill Total assets…
A: The quick ratio is a financial ratio, With the help of this ratio organization gets to know whether…
Q: What rate compounded monthly will yield the effective rate 19.75%?
A: Effective annual interest rate (EAR) refers to the real rate of return that we earn on our savings…
Q: Karla plans to retire at age 68, and estimates that $39,600 a year in retirement for 23 years will…
A: As per the given information: Current age = 29Retirement age = 68Time period for savings = 68-29 =…
Q: (Answers that are Multiples (x) or Percents (%) should be carried to 1 decimal place or 2 if…
A: The long-term debt to total capitalization ratio is calculated by dividing long-term debt by the…
Q: Consider a project with free cash flows in one year of $140,600 or $,173,300 with each outcome being…
A: STEP 1 CASH FLOW The net balance of money coming into and going out of a business at a particular…
Q: What sum of money due on October 1, 2026 is equivalent to $3000 due on January 1, 2003 if interest…
A: Data given: 1. i=1.2%/ year compounded monthly for 7 years =(1+1.2%/12)^(7*12) 2. i=6.8% / year…
Q: that a non-cash asset has high liquidity we are indicating that The assets can be converted to cash…
A: Liquidity of an asset is the ability of an asset to convert into cash quickly and provide with easy…
Q: . Bank A: $120,000 . Bank B: $95,000 Bank C: $325,000
A: FDIC is the federal deposit insurance corporation and provide the inusrance for deposits that are…
Q: Loaded-Up Fund charges a 12b-1 fee of 0.75% and maintains an expense ratio of 0.75%. Economy Fund…
A: Mutual Funds: Mututal Funds pool small investments from individual investors, aggregate them into…
Q: A producer of asset S is going to sell it at future time T. Draw naked position revenues as a…
A: A naked contract is a financial agreement in which one party takes a position without any offsetting…
Q: You want to invest $100.00 for three years at 10%. What will the $100 dollars grow to?
A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…
Q: gasoline costs 1.69 euro per liter in France. What is the price in dollars per gallon?
A: Exchange rate 1 Euro =US $ 1.09 1 gallon = 3.785411784 liter 1 litre = 0.264172 gallon
Q: Sunrise, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with…
A: STEP 1 YTM YTM is an annualized rate that anticipates a bond is bought at the current market price…
Q: I am considering two investment options that are not mutually exclusive. (This means that both of…
A: Net present value is an important capital budgeting tool. It is the sum of all present values of…
Q: Assume that you recently graduated and have just reported to work as an investment advisor at the…
A: STEP 1 Corporate Finance The ability to recognize and analyze various company strategies and…
Q: The importance of market efficiency and explain why some markets are more efficient than others.
A: Market efficiency refers to the degree to which market prices accurately reflect all available…
Q: You have $122,000 to invest in a portfolio containing Stock X and Stock Y. Your goal is to create a…
A: In the given case, we have provided the total investment amount of the portfolio . Since , the…
Q: Complete the following, using exact interest. (Use Days in a year table.) Note: Do not round…
A: Simple Interest can be calculated as = Principle x Rate of Interest x Time Period Here it is…
Q: Question 3 a) Describe the principle of a letter of credit (LC) and discuss the FOUR phases involved…
A: Letter of credit In essence, a letter of credit is a contract between a bank, a bank's client, and a…
Q: David owns a two-stock portfolio that invests in Falcon Freight Company (FF) and Pheasant…
A: Probability distribution of returns on two stocks have been provided. We need to find the expected…
Q: (a) What is CAPM and what purposes does it serve in finance in general, and in investments in…
A: (a) Capital Asset Pricing Model (CAPM) is a theory that states that the expected return on an…
Q: Honda Motor Company is considering offering a $2,200 rebate on its minivan, lowering the vehicle's…
A: Rebate: Rebate represents the credit paid to the buyer of a portion of paid amount for a service or…
Q: Compute the interest. Round off your final answer up to 2 decimal places. 1. P27,000 at 6.5% simple…
A: Answer 1. Principal = P27,000 Interest Rate = 6.5% Year = 1 Simple Interest =…
Q: The population of Eturia is shown in the table below. Population (millions) a. Population growth…
A: The growth rate is the measure of increase in a variable over a certain period of time. It can refer…
Q: We have a set of 8000 data points representing bank customers' behavior over the past year (each…
A: The confidence of an association rule is a measure of the strength of the relationship between the…
Q: 10. What interest rate, compounded monthly, will triple the value of an investment after 12 years?…
A: The funds infused into multiple avenues available in the market to grow their worth are regarded as…
Q: Work in excel, In 2020, a Detective Comics No. 27, featuring the first appearance of Batman, was…
A: The value of an investment or an asset or a financial security usually increases with passage of…
Q: Dont use excel please DIRECTIONS: Compute the requirements of each problem. All computations must be…
A: The Dividend Growth Model refers to a model that helps in calculating the intrinsic value of a stock…
Q: 6. Which of the following is gerally serving the regulatory function of taxation? a. Real Estate Tax…
A: Taxes are compulsory payment by the taxpayer to the government. The purpose of taxation can be for:…
Q: 1. Let the annual interest rate be 1 %. Compute 37 数字 Enter an answer correct to 6 decimal places.…
A: Annuity is a type of security that pays periodic payments over a fixed period of time. An annuity is…
Q: -year, 10% coupon bond (yearly coupon payments) with a face value of $1000 that John bought for…
A: Yield to maturity of bond equates the present value of coupon payment and plus present value of par…
Q: Which of the below statements is false for equity? A. Limited liability B.Residual claim on firm…
A: Equity holders are one among the stakeholders of a company. Equity holders or shareholders are the…
Q: Jonathan invested $8,000 eight years ago. The interest rate on his investment changed over time. It…
A: The concept of time value of money will be used to solve this question. Money invested at a point…
Q: Returns earned over a given time period are called realized returns. Historical data on realized…
A: Realized return is a relation to prior returns. Therefore, it is the amount of actual gains made on…
Q: Consider a stock price process S(n), with n = 0, 1, 2,..., that follows the Binomial Tree Model with…
A: The Binomial Tree Model is a mathematical model used to price financial derivatives, such as…
A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of 5%. What is the effective cost to the borrower?
A loan indicates the sum borrowed to meet personal or business requirements. For a borrower to be approved for a line of credit or an installment loan, they must maintain a compensating balance with the lender. It effectively serves as collateral and makes up for the lender's risk in issuing the loan.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Bozo Bank makes a loan to Rizzo Razors. It has a base lending rate on loans of 11% and charges a risk premium of 3% on the loan. It does not charge an origination fee, but imposes compensating balances of 10%. Reserve Requirements are 10%, and they do not pay interest. a. What would be the approximate cost of the loan to Rizzo Razors? b. What would be the return to the bank?Economics Consider a compounding loan plan where the amounts owed at EOYS 3 and 4 are $5,800 and $6.264, respectively. Approximately, what would be the amount of the loan?Establish a line of credit with the bank at an intrest rate of 10%. The bank will charge a fee of 1% to establish a line of credit. Calculate Actual percentage cost of line of credit
- A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers?Suppose that a bank does the following: a. Sets a loan rate on a prospective loan with BR = 4.23% and ϕ = 3.16%. b. Charges a 0.33 percent loan origination fee to the borrower. c. Imposes a 9 percent compensating balance requirement to be held as noninterest-bearing demand deposits. d. Holds reserve requirements of 8 percent imposed by the Federal Reserve on the bank’s demand deposits. Calculate the bank’s ROA on this loan.Hagar Company's bank requires a compensating balance of 10% on a $100,000 loan. If the stated interest on the loan is 7%, what is the effective cost of the loan?
- A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of 5%. What is the effective cost to the borrower? 6.05% 6.25% 6.32% 6.45% You invest $10,000 in a 270-day CD at a rate of 6%, compounded daily. What is the amount you receive at maturity? $10,460.24 $10,600.22 $11,200.35 $11,345.48You are the loan department supervisor for a bank. This installment loan is being paid off early, and it is your task to calculate the rebate fraction, the finance charge rebate (in $), and the payoff for the loan (in $). (Round dollars to the nearest cent.A bank is offering a loan of $20,000 with an interest rate of 9%, payable with monthly payments over a 4-year period. a. Calculate the monthly payment required to repay the loan. b. This bank also charges a loan fee of 4% of the amount of the loan, payable at the time of the closing of the loan (that is, at the time the borrower receives the money). What effective interest rate is the bank charging?
- Hendo Corp. can borrow from its bank using a one year (a) simple interest loan with an 11.3% quoted rate and no compensating balance or (b) a discount interest loan with a quoted rate equal to 9.9% that requires a 15% compensating balance. What is the EAR of the lower cost loan? Hendo Corp. normally tries to keep its checking account balance close to $0.A savings and loan charges 2.075 points for a home buyer to obtain a loan of $255,000. To calculate the discount points, what value should be multiplied by the loan amount? Also, calculate the discount points.To payoff a loan of $1000 you need to make 40 payment of $36.56 per month. What rate of interest are you paying? What is the stated or quoted rate? What is the annual percentage rate? What is the effective annual rate? What rate is bank likely to use to state its rate?