Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Related questions
Question
Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 8 percent interest. You would like to know the annual rate of interest for the following types of loans. (Each of the following parts stands alone.) a. Simple 8 percent interest with a 10 percent compensating balance. b. Discounted interest. c. An installment loan (12 payments). d. Discounted interest with a 1 percent administration fee.
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
Trending nowThis is a popular solution!
Step by stepSolved in 3 steps with 1 images
Knowledge Booster
Similar questions
- A finance company uses the discount method of calculating interest. The loan principal is $5,000, the interest rate is 10%, and repayment is expected in two years. You will receivearrow_forwardTo 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 ratearrow_forwardA $178,000 mortgage loan is offered at an APR of 4%. Follow the instructions below the table. The loan payment formula was used to calculate the monthly payments for the loans and results are reported in the table below. You do NOT have to verify the given payment entries (you already used the formula for calculating payments in the first part Loan term in years Monthly Payment on $178,000 loan (in $) Total amount paid back over the full loan term (in $) Interest over the full loan term (in $) Difference in monthly payment from option above (in $) t = 15 years Pmt = $ 1316.64 F = I = No entry here t = 30 years Pmt = $ 849.80 F = I = Difference in MONTHLY payment t = 40 years Pmt = $ 743.93 F = I = Difference in MONTHLY payment t = 50 years Pmt = $ 686.56 F = I = Difference in MONTHLY payment For each loan term option, calculate the total amount paid back over the…arrow_forward
- You have taken a loan of $78,000.00 for 20 years at 4.9% compounded quarterly. Fill in the table below, rounding all values to the nearest cent. Note that the principal column is listed before the interest column even though the interest calculation is done first. Many lending institutions use this order in the amortization schedules they provide to their customers. Payment number Payment amount Principal Amount Interest 0) 1) 2) 3) $ S $ $ s Balance $78,000.00 $arrow_forwardBank JPX is offering personal loans of $35,000 to be repaid over 6 years with payments of $625 per month. The first loan payment occurs one month after borrowing the $35,000. What effective annual rate (EAR) are they charging on this loan?arrow_forwardSuppose 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 79arrow_forward
- Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 14 percent interest. Calculate the effective rate of interest for the following types of loans. a. Simple 14 percent interest with a compensating balance of 10 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.) c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.) d. Discounted interest with a compensating balance of 5 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)arrow_forwardA local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $30,000, the interest for the year will be $5,100. Because you must repay a total of $35,100 in one year, the finance company requires you to pay $35,100/12, or $2,925.00, per month over the next 12 months. a. What rate would legally have to be quoted? b. What is the effective annual rate?arrow_forwardUsing manual formulas and not excel:arrow_forward
- Jack Abrams borrowed $8,000 for nine months at an interest rate of 7% (simple interest). The bank also charges a $100 processing fee. What is the actual interest rate for this loan?arrow_forward(7) A finance company offers a "8% plan". The cost of a one-year loan is 8%, and this cost is added to the loan. This total is then divided by 12 to get the monthly payments. Calculate the nominal and effective interest rates being charged for a loan of $7,000.arrow_forwardInvestigate the effect of the interest rate on simple interest amortized auto loans by finding the monthly payment and the total interest for a four-year loan of $15,000 at the following interest rates. (Round all answers to the nearest cent.) (a) 6.5% payment total interest (b) 6.75% payment total interest (c) 7.0% payment total interest $ 355.72 $ 2054.04 $ 357.46 $2174.04 $ 359.19 $ 2280 (d) 8.0% payment $366.19 total interest $ 2606.04 X X Xarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials Of InvestmentsFinanceISBN:9781260013924Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.Publisher:Mcgraw-hill Education,
Foundations Of FinanceFinanceISBN:9780134897264Author:KEOWN, Arthur J., Martin, John D., PETTY, J. WilliamPublisher:Pearson,
Fundamentals of Financial Management (MindTap Cou...FinanceISBN:9781337395250Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i...FinanceISBN:9780077861759Author: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 ProfessorPublisher:McGraw-Hill Education
Essentials Of Investments
Finance
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Mcgraw-hill Education,
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