Maris Bank has analyzed the accounts receivable of Anthony Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lending rate set at prime 3% and a 2% commission charge. The prime rate currently is 8.5%. Show Solutions and Explanation. A. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Anthony
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- Mr samuel approached the arnett national bank for a 15,000 loan to purchase vehicle the bank charges interest at the rate of 18 percentage per annum for the duration of the loan the bank also charges the followin fees :BANK FEES 8 percent, stamp duty 0.1 percent,legal fees 7.5 percent, application fee 1 percent a 20 percent deposit of the amount of the loan must also be made if the loan is approved .Calculate: the total amount paid of the fees charged by bankMr. Fernandez has applied for a revolving credit line of $ 9 million to assist in marketing a new product line. The terms of the loan will be as follows:(a) All the loans will be discount loans.(b) A fixed commitment fee of 0.2 percent will be charged.(c) The compensatory balance requirements will be 8 percent on the total credit line and 6 percent on the outstanding loans.(d) The bank will pay 2 percent interest on demand deposits.(e) The rate of interest to be charged will be the prime rate plus 3 percent.(f) The bank will use the "actual/360" accrual method to compute interest payments.(g) The credit line will be extended for a period of five years.The loan officer estimates that Mr. Fernandez will use about 67 percent of the credit line on average. If the prime rate is 10 percent and the required reserve rate on demand deposits is 16 percent, what is the effective cost to Mr. Fernandez?Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lending rate set at prime 3% and a 2% commission charge. The prime rate currently is 8.5%. 1.The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? Format: 111,111 2.What is Scientific Software’s effective annual rate of interest if it borrows $100,000 for 12 months? (Note: Assume a 365- day year and a prime rate that remains at 8.5% during the life of the loan.) Format: 11.1%
- Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $134,000 that it will accept as collateral. The bank’s terms include a lending rate set at prime plus 3% and a 2% commission charge. The prime rate currently is 8.5%. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 85% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? What is Scientific Software’s effective annual rate of interest if it borrows $100,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 8.5% during the life of the loan.)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?Cloud Venture has a line of credit with a local bank of $75,000. The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed. What is the effective interest rate if the firm needs $58,000 for one year to finance a fixed asset purchase?
- Jhar Industries has borrowed $125,000 under a line-of-credit agreement. While the company normally maintains a checking account balance of $15,000 in the lending bank, this credit line requires a 20% compensating balance. The stated interest rate on the borrowed funds is 10%. Show Solutions and Explanation. A. What is the effective annual rate of interest on the line of credit? (Format: 11.11%)Kansas City Castings (KCC) is attempting to obtain the maximum loan possible using accounts receivable as collateral. The firm extends net-30-day credit. The amounts that are owed KCC by its 12 credit customers, the average age of each account, and the customer’s average payment period are as shown in the following table. If the bank will accept all accounts that can be collected in 45 days or less as long as the customer has a history of paying within 45 days, which accounts will be acceptable? What is the total dollar amount of accounts receivable collateral? (Note: Accounts receivable that have an average age greater than the customer’s average payment period are also excluded.) In addition to the conditions in part a, the bank recognizes that 5% of credit sales will be lost to returns and allowances. Also, the bank will lend only 80% of the acceptable collateral (after adjusting for returns and allowances). What level of funds would be made available through this lending…Blooming Dales, Inc., has just set up a formal line of credit of $10 million with First Community Commercial Bank. The line of credit is good for up to five years. The bank will charge an interest rate of 6.00 percent on any amount borrowed, and the firm will pay an annual fee of 96 basis points on the unused balance. The firm borrowed $7.5 million on the first day the credit line became available. What is the effective interest rate on this line of credit? (Round answer to 2 decimal places, e.g. 12.25%.)
- (Related to Checkpoint 18.2) (Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 16 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 7 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $110,000 for a period of 6 months, what is the annualized cost of the bank loan?(Related to Checkpoint 18.2) (Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 14 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 8 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $90,000 for a period of 2 months, what is the annualized cost of the bank loan? The annualized cost of the bank loan is%. (Round to two decimal places.) (...)Cerise Company would record a note payable of_____, if the terms of the loan with a bank are as follows: Cersie Company would have to make one $102,000 payment in two years. Assume the market interest rate is 10% per year and the company rounds to the nearest dollar. (The present value of $1 for two periods at 10% is 0.82645). a.) $94,498 b.) $84,298 c.) $10,200 d.) $74,098