Question: Problem 1 4 - 5 Compensating Balance ( LG 1 4 - 7 ) a . What interest rate would make it worthwhile to incur

Problem 14-5 Compensating Balance (LG14-7)
a. What interest rate would make it worthwhile to incur a compensating balance of $19.000 in order to get a l-percent lower interest rate on a 1-year, pure discount loan of $270,000?
b. Is it worth incurring the compensating balance to obtain the lower rate?
Problem 1 4 - 5 Compensating Balance ( LG 1 4 - 7

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

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

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

5. The following compound journal entry was made to reconcile the February 28, 2014 cash in bank balance in the accounting records and the balance per bank statement as of the same month end:...

Q:

CARREFOUR S.A. How is Carrefour financing its growth? How risky is this financial strategy? Develop a cash-flow statement for Carrefour Would you alter the mix of wholly owned stores, joint venture...

Q:

You are required to create a 12-month budget (except as noted) with monthly columns and one 2016 total column for each of the following items (on the following tabs listed in parenthesis): 1. Sales...

Q:

explain ANSWER ALL In this problem we consider a model of a closed economy in the "very short run". Time is continuous. The assumptions are: = (( ) + ) (1) 0 0 1 0 0 = ( ) 0 0 (2) = 1 (3) 1 + = (4)...

Q:

2 of 20 5.0 Points An exporter manufacturing a specialized piece of equipment can hedge the risk that its customer will cancel the contract before shipment by obtaining a A. consignment contract B....

Q:

Jane is a newborn. Her parents are planning to contribute $4.000 a year (or possibly less) towards her college fund into an account that will grow at a constant rate of 4.5% a year. Both parents work...

Q:

Requirements: You are required to create a 12-month budget (except as noted) with monthly columns and one 2016 total column for each of the following items (on the following tabs listed in...

Q:

Year of assessment 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 15% 15% 15% 15% 15% 15% Standard Rate (Salaries tax, property tax and personal assessment) 2% 2% 2% 2% Progressive Rates Upon the...

Q:

QUESTION 3 [14 marks] Bill has bought a new home in Canberra. He borrowed $600 000 at a 12 rate given as 150 basis points over the Australian 10-year government bond yield for 2018. The loan is to be...

Q:

ALAN & ANGEL YOUNG MINI CASE & EXERCISES Today is January 1, 2020 EXECUTIVE SUMMARY Family Description Alan and Angel Young are both 36 years old. Mr. Young recently accepted a new job making $93,000...

Q:

Find the equation of the tangent at the Point (3, 4) if x + y = 25

Q:

StatCo is in its 3rd generation of ownership that is specialized in constructing private hospitals. The company founder, Mr. Robert Jaber, retired twenty years ago and left the company to his son,...

Q:

IASB requires companies to use which method for reporting changes in accounting policies? Question 8Answer a. averaging approach b. cumulative effect approach c. retrospective approach d. prospective...

Q:

Solve B. 6a2-23a +20. a +2 2a2-a-10 2a-5