A local finance company quotes a 17% interest rate on one-year loans. So, if you borrow $25,000,
Question:
A local finance company quotes a 17% interest rate on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,250. Since you must repay a total of $29,250 in one year, the finance company requires you to pay $29,250/12, or $2,437.50, per month over the next 12 months. Is this a 17% loan? What rate would legally have to be quoted? What is the effective annual rate?
Step by Step Answer:
To find the APR and EAR we need to use the actual cash flo...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781259654756
10th Canadian Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan, Gordon Roberts, J. Ari Pandes, Thomas Holloway
Related Video
Interest, debt, finance, and capital markets are all important concepts in the world of economics and business. Interest is the cost of borrowing money, and it is typically expressed as a percentage of the amount borrowed. Debt is the money that is borrowed, and it has to be repaid with interest. Finance is the study of how individuals, companies, and organizations manage their money and investments. Capital markets are the places where companies and governments can raise money by selling stocks and bonds to investors. These markets play an important role in the overall economy by helping to fund investment and growth.
Students also viewed these Business questions
-
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $15,000, the interest for the year will be $2,550. Because you must repay a total of $17,550 in one...
-
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $25,000, the interest for the year will be $4,250. Because you must repay a total of $29,250 in one...
-
A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow $20,000, the interest for the year will be $3,400. Because you must repay a total of $23,400 in one...
-
Gagnon's Autobody Ltd. repairs and paints automobiles after accidents. Explain how the basic statement of financial position accounts of assets, liabilities, and shareholders' equity would be...
-
If x is normally distributed with mean and standard deviation , and given that the probability that x is less than 32 is 0.0228, find the value of .
-
Time Warner Inc. (Time Warner) is a media and entertainment company that includes America Online, cable systems, film entertainment, television networks, and publishing. The following operating...
-
Discuss the following issues relating to criticism of conventional accounting. 1 Conventional accounting uses the accrual convention.What is the accrual convention? What is the main benefit of...
-
Richard Griffin and three other men owned a grain company called Bearhouse, Inc., which needed to borrow money. First National Bank was willing to loan $490,000, but it insisted that the four men...
-
Find WACCI? Metrics Project A Project B Initial Investment $(10,000,000) $(9,000,000) NPV $5,341,384 $4,162,681 Internal Rate of Return(IRR) 12.4 % 13.4% MIRR 13.03% 14.03% Profitability Index...
-
Aquatic Line Company (ALC) manufactures a variety of strong and durable ropes. The company manufactures all their products in a large factory located near Nephi, Utah. All the types of ropes the...
-
You want to buy a new Ducati Monster 696 for $78,000. The contract is in the form of a 60-month annuity due at a 7.25% APR. What will your monthly payment be? Assume that the APR is compounded...
-
What is the present value of $4,000 per year, at a discount rate of 10%, if the first payment is received six years from now and the last payment is received 20 years from now?
-
A logistics provider plans to have a new warehouse built to handle increasing demands for its services. Although the company is unsure of how much demand there will be, it must decide now on the size...
-
State whether you think a business would recognise the following as an expense. When would it be recognised? a Depreciation $350 b Wages to be paid in the next month $1200 c Electricity bill due to...
-
What are the three methods we can use to include the value of the tax shield in the capital budgeting decision?
-
How do we estimate a projects unlevered cost of capital when the projects risk is different from that of a firm?
-
What do we call the practice in which one company supplies another with managerial expertise over a specific period of time?
-
Use the following spreadsheet to work Problems. The spreadsheet provides data on the U.S. economy: Column A is the year, column B is the inflation rate, column C is the interest rate, column D is the...
-
In a playground, two slides have different angles of incline 1 and 2 (2 > 1). A child slides down the first at constant speed; on the second, his acceleration down the slide is a. Assume the...
-
Thalina Mineral Works is one of the worlds leading producers of cultured pearls. The companys condensed statement of cash flows for the years 20182020 follows. Required Comment on Thalina Mineral...
-
Product pricing the firm actually priced its product to be about 20 percent less than that of competitors, even though the Grandmother calendar was more detailed. In retrospect, was this a wise...
-
Product pricing the firm actually priced its product to be about 20 percent less than that of competitors, even though the Grandmother calendar was more detailed. In retrospect, was this a wise...
-
Corporate Borrowing if the firm was so successful at selling, why wouldnt a bank or some other lender step in and provide it with the cash it needed to continue?
-
A typical optic fiber has a thickness of only 6.00 x 10 nm. Consider a beam from a standard He-Ne laser that has a wavelength equal to 633 nm. Suppose this beam is incident upon two parallel slits...
-
What annual interest rate, r, is required to return $670 from $300 over 10 years? Give your answer as a percentage to two decimal places and assume growth compounds quarterly.
-
Collisions and elasticity In this problem, we'll analyze a one-dimensional collision between a car and a truck. You may find it helpful to use the elasticity parameter k, which is given by: = V1f-V2f...
Study smarter with the SolutionInn App