Tucker Drilling Corp. plans to borrow $200,000. Northern National Bank will lend the money at one-half...
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Tucker Drilling Corp. plans to borrow $200,000. Northern National Bank will lend the money at one-half percentage point over the prime rate of 8/½ percent (9 percent total) and requires a compensating balance of 20 percent. Principal in this case refers to funds that the firm can effectively use in the business. 7. What is the effective rate of interest? What would the effective rate be if Tucker Drilling were required to make four quarterly payments to retire the loan? Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 14 percent interest. You would like to know the effective rate of interest for the following types of loans. (Each of the following parts stands alone.) 8. Simple 14 percent interest with a 10 percent compensating balance. b. Discounted interest. a. c. An installment loan (12 payments). d. Discounted interest with a 5 percent compensating balance. If you borrow $12,000 at $900 interest for one year, what is your effective interest rate for the following payment plans? 9. Annual payment. Semiannual payments. Quarterly payments. d. a. b. c. Monthly payments. Tucker Drilling Corp. plans to borrow $200,000. Northern National Bank will lend the money at one-half percentage point over the prime rate of 8/½ percent (9 percent total) and requires a compensating balance of 20 percent. Principal in this case refers to funds that the firm can effectively use in the business. 7. What is the effective rate of interest? What would the effective rate be if Tucker Drilling were required to make four quarterly payments to retire the loan? Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 14 percent interest. You would like to know the effective rate of interest for the following types of loans. (Each of the following parts stands alone.) 8. Simple 14 percent interest with a 10 percent compensating balance. b. Discounted interest. a. c. An installment loan (12 payments). d. Discounted interest with a 5 percent compensating balance. If you borrow $12,000 at $900 interest for one year, what is your effective interest rate for the following payment plans? 9. Annual payment. Semiannual payments. Quarterly payments. d. a. b. c. Monthly payments.
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Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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