Paymaster Enterprises has arranged to finance its seasonal working- capital needs with a short- term bank loan. The loan will carry a rate of 12 percent per an-num with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $ 100,000 for a period of 3 months, what is the cost of the bank loan?
Answer to relevant QuestionsWhat is the relationship between financial decision making and risk and return? Would all financial managers view risk– return trade- offs similarly? Explain the impact of inflation on rates of return. The R. Morin Construction Company needs to borrow $ 100,000 to help finance the cost of a new $ 150,000 hydraulic crane used in the firm’s commercial construction business. The crane will pay for itself in 1 year, and the ...What is meant by arbitrage profits? Suppose 90- day investments in Europe have a 5 percent annualized return and a 1.25 percent quarterly (90- day) return. In the United States, 90- day investments of similar risk have a 7 percent annualized return and a 1.75 ...
Post your question