ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required compensating balance of P700,000. How much is the simple effective annual interest of the loan? Should ABC accept this loan if another loan has similar terms but has a simple effective cost of 11%?
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ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required compensating balance of P700,000.
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How much is the simple effective annual interest of the loan?Should ABC accept this loan if another loan has similar terms but has a simple effective cost of 11%?
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- In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $42,000 and the interest rate is 8.50%, the borrower “pays” 0.0850 × $42,000 = $3,570 immediately, thereby receiving net funds of $38,430 and repaying $42,000 in a year. a. What is the effective interest rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 18.50%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)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?In order to borrow $100,000 for a 5% loan on a discount loan basis with a 5% compensating balance; the firm will actually have to borrow?
- a) You expect to incur a cost and make a payment of £35,000 in one year. You areplanning to take a loan then to cover the expense, and repay the loan a one yearlater. Currently, a one-year and two-year interest rates are 1.15% and 1.25%,respectively. What forward rate would you expect to be applicable to your loan? Ifthere was a forward rate agreement available in the market, offering 1.2% over aone-year period starting in one year from now, would you use it? Explain.Assuming you did enter into this agreement, analyse the relevant gains or losses.Paymaster Enterprises has arranged to finance its seasonal working capital needs with a short term bank loan. The loan will carry a rate of 0.072 per anum paid in advance (discounted). If Paymaster plans to borrow $760000 for a period of 7 months, what is the cost of the loan.ABC is inclined to take a bank loan that has a face amount of P5,000,000, a term of 6 months, interest of 10%, and required compensating balance of P700,000. Compute for the following: 1. How much is the simple effective annual interest of the loan? 2. Should ABC accept this loan if another loan has similar terms but has a simple effective cost of 11%?
- Hagar Company's bank requires a compensating balance of 10% on a $100,000 loan. If the stated interest on the loan is 7%, what is the effective cost of the loan?Your business requests a 3-month loan for $500,000. What will be the interest paid at the end of the term if the business risk percentage is assessed at 2.0% and LIBOR is at 2.1%?Problem D: Effective cost of Short‐term Loan:ABC would need cash of P5,000,000. Several banks offered different loan conditions. One of the loans has a term of 6 months,interest of 5%, and compensating balance of P50,000Required:1. How much should the face value of the loan be?2. How much is the simple effective annual interest?Problem E: Effective cost of Short‐term Loan: ABC will be acquiring a P4,000,000 loan from XYZ Bank. 13. The detail are 6‐month term, 3% interest, P40,000 bank chargeand P50,000 compensating balance.Required:1. How much is the compound effective annual interest?
- ABC’s bank offered a loan with conditions of a P5,000,000 face amount, 6-month term, 4% interest deducted in advance and bank charge of P30,000. How much is the simple annual effective cost of the bank loan?If you borrow $1,000 at 8.5% simple interest and the loan requires a lump sum payment of $1,213.16, what is the term of the loan? (Round your answer to the nearest whole number.)t = daysVan Buren Resources Inc. is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity. a. Calculate the loan’s annual financing cost. b. Calculate the loan’s annual percentage rate. c. What is the reason for the difference in your answers to Parts a and b?