Ezze Mattress needs to raise $200,000 for 6 months. The bank quotes a discount interest rate of 7.5% but does not require compensating balances. What is the effective annual interest rate on this loan? Multiple choice question. 7.50% 8.11% 7.84% 7.81%

Ezze Mattress needs to raise $200,000 for 6 months. The bank quotes a discount interest rate of 7.5% but does not require compensating balances. What is the effective annual interest rate on this loan? Multiple choice question. 7.50% 8.11% 7.84% 7.81%

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

See similar textbooks

Related questions

Q: The First Bank of Lending lists the following APR for loans. Determine the APY, or effective…

A: The conceptual formula used:

Q: What annual payment is required to pay off a four-year, $29,000 loan if the interest rate being…

A: Loan amount (L) = $29000 Let the annual payment = A Monthly payment = M EAR = r = 7% Let monthly…

Q: 1. Edison Mfg. needs to borrow $50,000 for six months. If the annual interest rate is 15%, what is…

A: A compensating balance is the amount that the borrower needs to keep as an average balance with the…

Q: Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 8…

A: Amount borrowed = $5 millionPeriod of loan = 12 monthsStated rate = 8%

Q: How much is the interest if you need to borrow 400,000 for one year with 475,000 line credit, where…

A: Interest = amount borrowed * rate of interest

Q: NAB offers a car loan that will require you to pay 8% per annum, compounded weekly. Which of the…

A: Effective annual rate is the equivalent rate in comparison with the interest rate that is compounded…

Q: 8 Brampton Truck Parts needs $652,000 to take a cash discount of 2.50/10, net 70. A banker will loan…

A: 1. Loan Amount Needed: $652,0002. Cash Discount: 2.50%3. Discount Period: 10 days4. Credit Terms:…

Q: Royal Bank charges administration fees of 2.9% of the loan amount per annum. Target Corporation has…

A: Here,Administration Fees (f) is 2.9%Negotiated Interest Rate (BR+m) is 10.5%Compensating Balance (b)…

Q: Crab State Bank has offered you a $500,000 5-year loan at an interest rate of 9.75 percent,…

A: The process of extending out the repayment of a loan over a period of time is referred to as…

Q: Metro bank offers one-year loans with a 9 percent stated rate, charges a ¼ percent loan origination…

A: Banks should take all factors into consideration before charging the interest rate to clients and…

Q: Assume you are making 10% of downpayment of a loan of 48,965.30 what is my montly payment over the…

A: Calculate the downpayment amount:Downpayment = 10% of $48,965.30 = $4,896.53 Find the loan amount…

Q: OZ Bank finances a $53000 2-year fixed-rate loan with a $70000 1-year fixed-rate CD. Use the…

A: A certificate of deposit (CD) is an investment account that retains a specific amount of capital for…

Q: Hernandez Engineering borrows $5,500, at 6 1 2 % interest, for 150 days. If the bank uses…

A: Detailed explanation:1. Principal amount borrowed: $5,500 Interest rate: 6.12% (converted from…

Q: The First Bank of Lending lists the following APR for loans. Determine the APY, or effective…

A: The effective rate of interest is the effective rate of interest per annum including the effect of…

Q: A bank makes a loan of $1,000,000 at a rate of 6% p.a. It also requires a compensating balance of…

A: A loan indicates the sum borrowed to meet some personal or business needs. The lender generally…

Q: Yoo Incorporated, has arranged a line of credit that allows it to borrow up to $63 million at any…

A: We need to use compound interest formula below to calculate interest Compound interest = P[(1+i)n…

Q: Bank A offers a 272-day discounted loan at a simple discount rate of 12%. i. How much money would a…

A: Given, Simple discount rate = 12% Discounted loan days = 272

Q: National Co. needs to borrow P300,000 for the next 6 months. The company has a line of credit with a…

A: The company does not have sufficient compensating balance so it will have to borrow a sum greater…

Q: Alaska USA Federal Credit Union charges 13.9 percent compounded monthly on its loans. First National…

A: Effective annual rate (EAR) is the annual rate of interest actually paid or earned. EAR can be…

Q: Find the annual percentage rate using the annual percentage rate table. Here are some conditions of…

A: A loan is a financial arrangement in which one or more people, companies, or other entities lend…

Q: The First Bank of Lending lists the following APR for loans. Determine the APY, or effective…

A: APR is the annual rate of interest which is charged on a loan. The borrower needs to make loan…

Q: Wildcat engineering decides to take a $10,000 interest only lona. The loan is to be paid montly over…

A: Interest only loan can be described as the loan on which borrower only pays the interest payments…

Q: What is the EAR of the lower cost loan?

A: Effective Annual Rate = Interest paid / Funds availed for use Assume funds provided for loan is…

Q: Neveready Flashlights Inc. needs $340,000 to take a cash discount of 3/17, net 72. A banker will…

A: The first question is asking for the effective rate on the bank loan. The effective rate can be…

Q: The following installment loan is being paid off early. Calculate the rebate fraction, the finance…

A: The finance charged is the total cost that has charged for borrowed the specified amount for…

Q: A store will give a 2.5% disount on the cost of purchase if you pay cash today. The payment is due…

A: Effective annual rate (EAR) is a measure of the true annual interest rate that takes into account…

Q: 4. Calculate the effective annual rate of a loan that charges 1.2% per month. Select one: A. 15.4%…

A: The objective of the question is to calculate the effective annual rate (EAR) of a loan that charges…

Q: Cost of Bank Loans Gifts Galore Inc. borrowed $1.65 million from National City Bank. The loan was…

A: Effective interest rate refers to the compounded rate of interest for the number of compounded…

Q: Find the finance charges on a 8.4 percent, 18-month, single-payment loan when interest is computed…

Q: Find the annual financing cost of a 45 day revolving credit agreement with a 0.5% commitment fee.…

A: Meaning of: Revolving credit - Revolving credit is an arrangement wherein an account holder can…

Q: get help with this question please

A: When the effects of compounding over time are taken into account, the effective annual interest rate…

Q: Wells Fargo gives you an offer of $450,000 at a mortgage rate 5.5%, compounded quarterly. Citi Bank…

Q: An automobile loan of $26,000 at a nominal rate of 12% compounded monthly for 48 months requires…

A: Amortization table is a schedule which shows periodic lease or loan payments. The periodic payment…

Q: pital Corporation (CCC) is taking out a new 2-year bank loan for $100,000 at 6% interest (APR…

A: The given problem can be solved using EFFECT function in excel. EFFECT function computes effective…

Q: Your company has agreed to a $340 million fixed-commitment line of credit. The loan agreement calls…

A: The effective annual rate (EAR) is the interest rate that is actually earned or paid on an…

Q: Big Bank charges 5% compounded semi-annually and Little Bank charges 5.0% compounded quarterly on…

A: The effective annual rate of the loan is the deciding factor for understanding the actual interest…

Q: Assume a bank’s review of its historical loan losses has been estimated at 2% for its auto loans.…

A: Loss on loan is 2% of $1,000,000 =$20,000 Total interest to be earned on gross loan = 6%*1,000,000 =…

Q: Bank A offers you a loan at 5.76% compounded 2 times a year. Bank B offers to loan you the same…

A: Effective rate is the rate which takes into consideration the impact of compounding frequency. Here…

Q: A declining balance loan for $3000 entails paying about $275 for each of 12 months, for a total of…

A: When we take loans we have to pay interest. In case of a declining balance loan the interest amount…

Q: Net Cash Flows and NPVs for different discount rate for projects S and L are given below Net…

A: NPVs @10% is 161.33. It is given in the question itself.

Q: The Mutt Hut Pet Shop borrowed $59,000 on March 1 for 132 days. The rate was 11% using the ordinary…

A: Given information: Amount borrowed $59,000 Interest rate 11% loan term 132 days First…

Q: Straight bank loan. Left Bank has a standing rate of 7.9% (APR) for all bank loans and requires…

A: As you have posted multiple questions, we will solve the first question for you. To get remaining…

Q: The First Bank of Lending lists the following APR for loans. Determine the APY, or effective…

A: The Annual Percentage Yield (APY) is a measure of the total return on an investment or the total…

Question

Multiple choice question.

7.50%

8.11%

7.84%

7.81%

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Calculate effective annual interest rate

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 6 images

SEE SOLUTION Check out a sample Q&A here

Similar questions

Current Attempt in Progress The Cullumber Bank requires borrowers to keep an 10 percent compensating balance. Gorman Jewels borrows $480,000 at a 8 percent stated APR. What is the effective interest rate on the loan? What is the effective interest rate (Round answer to 2 decimal places, e,g. 12.25%.)
Sam's Auto Repairs Inc. borrowed $9231 to be repaid by monthly payments over 4 years. Interest on the loan is 3.55% compounded semi-annually. (*Hint: General Annuity) Compute the equal monthly payment. Round your answer to 2 decimal places. Do not enter the dollar sign. Sample input: 124.34 need all steps of calculations for rough work and Create a full loan amortization table for Question
To borrow $3,400, you are offered an add-on interest loan at 9.6 percent with 12 monthly payments. Compute the 12 equal payments. Use the amount you borrowed and the monthly payments you computed to calculate the APR of the loan. Then, use that APR to compute the EAR of the loan. Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Equal payment Effective annual rate
Plz don't use excel.
Bank A offers you a loan at 8.52% compounded 5 times a year. Bank B offers to loan you the same amount at 0.10% less than the rate offered by Bank A but compounded twice as often as the Bank A rate is. Which bank's loan should you accept? As your answer, enter the effective rate (in percent, to two decimal places at least) offered by the bank whose loan you should accept.
Cost of Bank Loans A). Del Hawley, owner of Hawley’s Hardware, is negotiating with First City Bank for a 1-year loan of $100,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. Do not round intermediate calculations. Round your answers to two decimal places. A 8.75% annual rate on a discounted loan, with a 15% compensating balance. % Interest figured as 8% of the $100,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year. % B). Gifts Galore Inc. borrowed $1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 15% compensating balance requirement raised the effective interest rate. Do not round intermediate calculations. Round your answers to two decimal places. The nominal annual rate on the loan was 11.25%. What is the true effective rate? %
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?
mc attahced
What are the repayment schedules for each of the following five-year, 9 percent $11,000 term loans? Use Appendix D to answer the questions. Do not leave any cells blank. If the answer is zero, enter "0". Do not round intermediate calculations. A. Equal annual payments that amortize (retire) the principal and pay the interest owed on the declining balance. Round your answers to the nearest cent. Balance Interest Principal Year payment repayment on loan $ $ $ $ $ 1 2 3 4 5 $ $ $ $ $ Interest Principal Balance Year payment repayment on loan 1 $ $ 2 is B. Equal annual principal repayment, with interest calculated on the remaining balance owned. Round your answers to the nearest dollar. $ $ 3 $ $ $ 4 5 es $ $ $ $ $ $ $ $ $ $ $ $ $
Suppose you borrow $14,000. The interest rate is 11%, and it requires 4 equal end-of-year payments. Set up an amortization schedule that shows the annual payments, interest payments, principal repayments, and beginning and ending loan balances. Round your answers to the nearest cent. If your answer is zero, enter "0". Beginning Repayment Ending Year Balance Payment Interest of Principal Balance 1 $ fill in the blank 60 $ fill in the blank 61 $ fill in the blank 62 $ fill in the blank 63 $ fill in the blank 64 2 $ fill in the blank 65 $ fill in the blank 66 $ fill in the blank 67 $ fill in the blank 68 $ fill in the blank 69 3 $ fill in the blank 70 $ fill in the blank 71 $ fill in the blank 72 $ fill in the blank 73 $ fill in the blank 74 4 $ fill in the blank 75 $ fill in the blank 76 $ fill in the blank 77 $ fill in the blank 78 $ fill in the blank 79
Crab State Bank has offered you a $1,500,000 5-year loan at an interest rate of 9.25 percent, requiring equal annual end-of-year payments that include both principal and interest on the unpaid balance. Develop an amortization schedule for this loan. Round your answers to the nearest dollar. Do not round intermediate calculations. End of Year Payment Interest (9.25%) Principal Reduction Balance Remaining 0 - - - $1,500,000 1 $ $ $ 2 3 4 5
National Company has a P25,0000 line of credit at a 9% interest rate. The loan agreement requires a 3% compensating balance, which is based on the total amount borrowed, and which will be held in an interest-free account. What is the effective interest rate if the firm borrows P160,000 on the line of credit for one year? 8.67% 9.03% 8.78% 9.28%

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS