Youve worked out a line of credit arrangement that allows you to borrow up to $50 million
Question:
You’ve worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is .37 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a non-interest-bearing account. Assume that your bank uses compound interest on its line of credit loans.
a. What is the effective annual interest rate on this lending arrangement?
b. Suppose you need $15 million today and you repay it in six months. How much interest will you pay?
Step by Step Answer:
a we have EAR 1it 1 1 compensating balance EAR 10003712 1 ...View the full answer
Fundamentals Of Corporate Finance
ISBN: 9781265553609
13th Edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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
-
You've worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is .64 percent per month. In addition, 5 percent of the amount that you...
-
Costs of borrowing youve worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is .72 percent per month. In addition, 4 percent of the...
-
In Minland in Problem 15, the interest rate is 4 percent a year. Suppose that real GDP decreases to $10 billion and the quantity of money supplied remains unchanged. Do people buy bonds or sell...
-
Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through...
-
For each of the following salts, indicate whether the aqueous solution will be acidic, basic, or neutral. a. Fe(NO3)3 b. Na2CO3 c. Ca(CN)2 d. NH4ClO4
-
Describe the best way to validate the content of the use cases.
-
A 2.3-kg ball dropped from a height of \(2.0 \mathrm{~m}\) onto a steel plate rigidly attached to the ground bounces back to a height of \(1.7 \mathrm{~m}\). (a) What is the impulse delivered to the...
-
Brian and Kim have a 12-year-old child, Stan. For 2014, Brian and Kim have taxable income of $52,000, and Stan has non-qualifying dividend income of $4,500 and investment expenses of $250. No...
-
9. An arrow 2.5 cm high is placed at a distance of 25 cm from a diverging mirror of focal length 20 cm., Find the nature, position and size of the image formed. 10. The image formed by a convex...
-
Lawn King manufactures two types of riding lawn mowers. One is a low-cost mower sold primarily to residential home owners; the other is an industrial model sold to landscaping and lawn service...
-
Below are the most recent balance sheets for Country Kettles, Inc. Excluding accumulated depreciation, determine whether each item is a source or a use of cash and the amount: COUNTRY KETTLES, INC....
-
A bank offers your firm a revolving credit arrangement for up to $75 million at an interest rate of 1.75 percent per quarter. The bank also requires you to maintain a compensating balance of 5...
-
As in the following table, consider someone who retired in 2006 with $25,000 in initial Social Security benefits per year, and that the actual inflation rate is 2 percent per year over the next 20...
-
1. The table below shows the quantities demanded of milk per month by four families at various prices. Price of Gallon of The Berman Milk Family $3.00 19 $4.00 8 $5.00 $6.00 7 The Johnson Family 15...
-
A bank charges fees and/or gives interest based on the balance of an account. Fees are automatically deducted from a customer's account balance at the end of the month. Write a METHOD called findNew...
-
because the patel family bought a home this year, they are allowed to claim this expense on their tax return. by doing this, their taxable income should be lowered, thus requiring them to pay less...
-
Given sin y + x + 4y = cos x find
-
A taxpayer overstates the amount of their charitable contributions by $4,546 and saves themselves $1,000 in taxes in doing so. When the IRS reviews the return, they determine that the taxpayer had no...
-
Let V be an inner product space. (a) Prove that (x. v) = 0 for all v V if and only if x = 0. (b) Prove that (x. v) = (y. v) for all v e V if and only if x = y. (c) Let v1,...,vn be a basis for V....
-
Four GWU students have been selected to taste food sold by 3 different food trucks labeled as food truck A, B and C on H & 22nd Streets every Monday for 3-weeks. For each student, food trucks are...
-
First Simple Bank pays 7.5 percent simple interest on its investment accounts. If First Complex Bank pays interest on its accounts compounded annually, what rate should the bank set if it wants to...
-
You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements. You can have $75,000 per year for the next two years, or you can...
-
You have just won the lottery and will receive $1,500,000 in one year. You will receive payments for 30 years, and the payments will increase by 2.5 percent per year. If the appropriate discount rate...
-
Blossom Corporation had the following transactions. 1. Sold land (cost $11,800) for $14,800. 2. Issued common stock at par for $20,000. 3. Recorded depreciation on buildings for $16,800. 4. Paid...
-
Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $330,000 of its fixed costs are...
-
The following transactions apply to Walnut Enterprises for Year 1, its first year of operations: 1. Received $42,500 cash from the issue of a short-term note with a 6 percent interest rate and a...
Study smarter with the SolutionInn App