Colson Company has a line of credit with Federal Bank: Colson can borrow up to $386,000 at any time over the course of thecalendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed andrepaid during the first four months of the year Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank'sprime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. Theinterest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent)annual interest on $81.000 for the month of January.MonthJanuaryFebruaryMarchAprilAmount Borrowed:or (Repaid).$81,000117,900(24,400)27,600Requireda. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year.b. Compute the amount of Colson's liability at the end of each of the first four months.Required A Required BMonthComplete this question by entering your answers in the tabs below.JanuaryFebruaryMarchAprilPrime Rate forthe Month.Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. (Round youranswers to the nearest whole dollar)$3.75%2.753.253.75.InterestPaid422870836909 XAnswer is complete but not entirely correct.Required B > Colson Company has a line of credit with Federal Bank, Colson can borrow up to $386,000 at any time over the course of thecalendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed andrepaid during the first four months of the year. Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank'sprime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. Theinterest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent)annual interest on $81,000 for the month of January.MonthJanuaryFebruaryMarchAprilAmount Borrowedor (Repaid).$ 81,000117,900(24,400)27,600Requireda. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year.b. Compute the amount of Colson's liability at the end of each of the first four months.Required A Required B.MonthJanuaryFebruaryMarchAprilComplete this question by entering your answers in the tabs below.$Compute the amount of Colson's liability at the end of each of the first four months. (Do not round intermediate calculations.Round your final answers to the nearest whole dollar.)Prime Rate forthe MonthBalanceEnd ofMonth3.75%2.753.253.7581,000✔198,900174,500✔174,500XAnswer is complete but not entirely correct.< Required A

The fee a borrower pays for accessing funds from a revolving line of credit is known as interest on…

Colson Company has a line of credit with Federal Bank: Colson can borrow up to $386,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank's prime rate Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent) annual interest on $81,000 for the month of January January February March April Amount Borrowed or (Repaid) $81,000 117,900 (24,400) 27,600 Prime Rate for the Month: 3.75% 2.75 3.25 3.75 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. b. Compute the amount of Colson's liability at the end of each of the first four months.

Colson Company has a line of credit with Federal Bank: Colson can borrow up to $386,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank's prime rate Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent) annual interest on $81,000 for the month of January January February March April Amount Borrowed or (Repaid) $81,000 117,900 (24,400) 27,600 Prime Rate for the Month: 3.75% 2.75 3.25 3.75 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. b. Compute the amount of Colson's liability at the end of each of the first four months.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 30P

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Colson Company has a line of credit with Federal Bank Colson can borrow up to $386,000 at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year. Colson agreed to pay interest at an annual rate equal to 2.50 percent above the bank's prime rate Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays 6.25 percent (3.75 percent + 2.50 percent) annual interest on $81,000 for the month of January Januarry: February March Required A Amount Borrowed or (Repaid) $81,000 117,900 (24,400) 27,600 Required a. Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year. b. Compute the amount of Colson's liability at the end of each of the first four…
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