A company needs to increase its working capital by (1,346,000 Riyals), the Chief Financial Officer (CFO) decided to get a one-year short-term loan from the bank at a discounted interest rate of (28.5%), note that is required to keep (11.7%) as a compensating balance. Calculate the Effective Interest Rate

A company needs to increase its working capital by (1,346,000 Riyals), the Chief Financial Officer (CFO) decided to get a one-year short-term loan from the bank at a discounted interest rate of (28.5%), note that is required to keep (11.7%) as a compensating balance. Calculate the Effective Interest Rate

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

A company borrows 100,000$ and must repay it in a month. What is the effect of this borrowing on the company's net working capital? Select one: a.Net working capital will increase. b.Net working capital will not change. c.Net working capital will decrease. d.Insufficient information given.
The financial managers at Henderson Corporation are arranging the financing for working capital requirements for the upcoming year. Henderson's local bank offers a discount interest loan at a quoted (simple) interest rate of 12.00%. 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 Henderson applies for a $300,000 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. 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? O 9.93% O 9.03% O 8.94% Value O 13.19%
A company receives a 5-year $100 million loan commitment from Wells Fargo at a fixed rate of 4.5%. The up-front commitment fee is 40 basis points and the unused portion of the loan is charged 15 basis points. The bank borrows a total of $45 million at the beginning of the year and none thereafter. The following is true, except: A The interest paid on the drawdown amount for the full year is $2,025,000. B The interest rate paid on the drawdown amount for the full year is 4.90% C The fee for the loan commitment for the full year is $400,000. D The fee for the unused portion of the loan commitment for the full year is $82,500
A small manufacturing company borrowed $1 million and repaid the loan through monthly payments of $20,000 for 2 years plus a single lump-sum payment of $1 million at the end of 2 years. The interest rate on the loan was closest to:a. 0.5% per monthb. 2% per monthc. 2% per yeard. 8% per year
Company A is contemplating on borrowing $500,000 to start a business. Credit union 1 has offered to loan the company the money at an interest rate of 14% compounded continuously. Credit union 2 has offered the money with the stipulation that the company repays it by making monthly payments of $120,000 for 5 years. From which credit union should the company borrow the money?
In the example below, we will use year-end assets. Bank A receives $70 in deposits at 5% and, together with 40 in equity, makes a loan of $90 at 7%. The remaining of assets is G-Bond. We will ignore taxes for the moment. NIM=Profit/Interest revenue Bank A Loan 7% $90 G-Bond 5% ? Deposits 5% $70 Equity $40 Total Assets $? Total Equity and Deposit $110 The amount of G-bond is $50 $70 $20 $40 $80 $60 $30 $10
7. Computing the cost of a discount interest loan The financial managers at Wallace Corporation are arranging the financing for working capital requirements for the upcoming year. Wallace's local bank offers a discount interest loan at a quoted (simple) interest rate of 8.00%. 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 Wallace applies for a $300,000 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. 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? O 5.78% O 6.03% O 8.51% Value O 6.42%
Wontaby Ltd. is extending its credit terms from 45 to 60 days. Sales are expected to increase from $4.75 million to $5.85 million as a result. Wontaby finances short - term assets at the bank at a cost of 12 percent annually. Calculate the additional annual financing cost of this change in credit terms. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to the nearest whole dollar. Enter answer in whole dollar not in million.) Annual financing costN
Utah Inc. would need cash of P5,000,000 for a period of 3 months from its bank. The latter offered 12% interest but it would be charged direct origination costs to be deducted in advanced in the amount of P200,000. What would the simple annual effective cost of this bank loan?
can it be solve please Useful Houseware Co. Ltd has received a $35,300 loan from Bank Corporation Limited. The annual payments are $4,589.81. If the company is paying 8.5% interest per year, how many loan payments must the company make? (Note on formatting: Round off to the nearest whole number.)
To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year. The amount of working capital The current ratio The acid-test ratio The average collection period (The accounts receivable at the beginning of last year totaled $250,000) The average sales period (The inventory at the beginning of last year totaled $500,000) The operating cycle The total asset turnover. (The total assets at the beginning of last year were $2,420,000) The debt-to-equity ratio The times interest earned ratio The equity multiplier (The total stockholder’s equity at the beginning of last year totaled $1,420,000) Could you please help me answer 7-9?
Stinson Corporation borrowed $85,000 at 8% compounded quarterly to buy a warehouse. Monthly payments of $1200 were made over the term of the loan. Construct a partial amortization schedule showing the last 2 payments. Determine the total amount paid to settle the loan. Show work, not just the answer. Determine the total principal repaid. Determine the total amount of interest paid. Show work, not just the answer.

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