# Question: Bank A offers the following terms for a 10 million

Bank A offers the following terms for a $10 million loan:

• Interest rate: 8 percent for one year on funds borrowed

• Fees: 0.5 percent of the unused balance for the unused term of the loan Bank B offers the following terms for a $10 million loan:

• Interest rate: 6.6 percent for one year on funds borrowed

• Fees: 2 percent origination fee

a. Which terms are better if the firm intends to borrow the $10 million for the entire year?

b. If the firm plans to use the funds for only three months, which terms are better?

• Interest rate: 8 percent for one year on funds borrowed

• Fees: 0.5 percent of the unused balance for the unused term of the loan Bank B offers the following terms for a $10 million loan:

• Interest rate: 6.6 percent for one year on funds borrowed

• Fees: 2 percent origination fee

a. Which terms are better if the firm intends to borrow the $10 million for the entire year?

b. If the firm plans to use the funds for only three months, which terms are better?

## Relevant Questions

Repeat Problem 1 to determine the percentage return on your investment but in this case suppose the price of the stock falls to $40 per share. What generalization can be inferred from your answers to Problems 1 and ...A self-employed person deposits $3,000 annually in a retirement account (called a Keogh account) that earns 8 percent. a. How much will be in the account when the individual retires at the age of 65 if the savings program ...A commercial bank offers you a $200,000 annual line of credit with the following terms: • origination fee: $2,000 paid when the line is accepted • fees: 1 percent on unused balance, paid at the end of the year • ...Corgi, Inc. plans to update its equipment at a total cost of $90,000. Management anticipates making a $15,000 down payment and borrowing the remainder from a local commercial bank at 12 percent interest. The first option ...The price of a stock is $61, and a six-month call with a strike price of $60 sells for $5. a. What is the option's intrinsic value? b. What is the option's time premium? c. If the price of the stock falls, what happens to ...Post your question