Question: In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.73 percent per quarter

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:

1. Pay 1.73 percent per quarter on any funds actually borrowed.

2. Maintain a 5 percent compensating balance on any funds actually borrowed.

3. Pay an up-front commitment fee of .25 percent of the amount of the line.

Based on this information, answer the following:

a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?

b. Suppose your firm immediately uses $210 million of the line and pays it off in one year. What is the effective annual interest rate on this $210 million loan?

Step by Step Solution

★★★★★

3.48 Rating (188 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Input Area Line of credit 400000000 for borrowing 160 Compensating balance 5 ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

969-B-C-A-C-B-A-M (613).xlsx

300 KBs Excel File

Students Have Also Explored These Related Cost Accounting Questions!

In exchange for a $300 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.85 percent per quarter on any funds actually borrowed. 2. Maintain a 4.5 percent...

The column shown in Fig. 1 is made of 4000-psi concrete and Grade-60 steel. (a) Compute the theoretical capacity of the column for pure axial load. (b) Compute the maximum permissible P, for the...

a. What is the effective annual interest rate when a nominal rate of 12% per year is compounded monthly? b. How many months does it take for a present sum of money to double if the nominal interest...

1. In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.92 percent per quarter on any funds actually borrowed. 2. Maintain a 1 percent...

iz 13 Saved 43 Book in exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following 1. Pay 1.9 percent per quarter on any funds actually borrowed. 2. Maintain...

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.97 percent per quarter on any funds actually borrowed. 2. Maintain a 1 percent...

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.82 percent per quarter on any funds actually borrowed. 2. Maintain a 1 percent...

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.97 percent per quarter on any funds actually borrowed. 2. Maintain a 1 percent...

i got most of the answers but i really don't understand how to get the two that are blank A bank offers your firm a revolving credit arrangement for up to $57 million at an interest rate of 1.52...

Chapter sixteen corporate finance Peeples, Inc., has a book value of equity of $14,325. Long-term debt is $8,200. Net working capital, other than cash, is $2,340. Fixed assets are $19,260. a. How...

Trumpet and Trombone Manufacturing, Inc. prepares financial statements for the year just ended 9/30/2022. The company's general ledger and other financial reports show the following balances. Prepare...

Question 5 (5 points) The Consumer Products Division of Mickolick Corporation had average operating assets of $470,000 and net operating income of $40,000 in August. The minimum required rate of...

A $ 6 9 comma 0 0 0 $ 6 9 , 0 0 0 loan is taken out on a boat with the terms 3 3 % APR for 3 6 months. How much are the monthly payments on this loan? Question content area bottom Part 1 A . $ 2...

Fiscal policy and the boom of 2018 in the simplest model The Tax Cut and Jobs Act was passed by Congress in December 2017. GDP grew from $18,000 billion (2012 dollars) in 2017 to $18,500 billion...

You have 40 years left until retirement and want to retire with $5 million. Your salary is paid annually, and you will receive $50,000 at the end of the current year. Your salary will increase at 3...

Often, junk bonds are not rated. Why?

Listed below are systolic blood pressure measurements (in mm Hg) obtained from the same woman. Find the regression equation, letting the right arm blood pressure be the predictor (x) variable. Find...

Do you believe these statistics? why or why not. The first variable in healthcare that I work with is temperatures of my post-surgical patients.Solet's say thatI had 3 normal temperatures of 36.7,...

Use the following selected data from Business Solutions's income statement for the three months ended March 31,2022 , and from its March 31 . 2022 , balance sheet to complete the requirements....