Calculate annual interest rate

Assignment Help Finance Basics
Reference no: EM1353545

Here's an old story: A man walks into a New York City bank and asks for a $5000 loan, offering his Ferrari, worth $250,000 as collateral. He tells the loan officer that he needs the money for two weeks for an important venture. The loan officer, having the car as security and after checking references, gives the man the money he requested, with a signed agreement that he will pay the money plus $45 in interest when he returns in two weeks. The bank officer takes the car keys and the car is parked in the bank's underground lot. The man returns in exactly two weeks, pays the loan and interest, and reclaims his car. The bank officer asked him why he was willing to pay such a high interest rate. His reply: where else can I safely park my car for two weeks in New York City for only $45?

A. What annual interest rate did the man pay?
B. How much would the man need to repay at the end of two months if he
borrowed $5000 with the same rules and same annual interest rate?

 

Reference no: EM1353545

Questions Cloud

Advantages of logging more information to alerts file : What are the advantages of logging more information to the alerts file? What are the disadvantages of logging more information to the alerts file?
Cultural limitations associated with assessment : What are at least two cultural limitations associated with assessment and treatment? Can you discuss the use or misuse of assessment instruments, therapy techniques, research results, or any other facet of clinical practice
Determine the current yield or cost of preferred stock : Ten years ago, Stigler Corporation issued $100 par value preferred stock yielding 8 percent. The preferred stock is now selling for $97 per share.
Statements that make variable-s field-s values consistent : Write one or two statements that make this variable's field's values consistent with the mathematical notion of "origin".
Calculate annual interest rate : A man walks into a New York City bank and asks for a $5000 loan; provide his Ferrari, worth $250,000 as collateral. He says loan  officer that he requires the money for two weeks for an important venture.
Illustrate what is the market elasticity of demand : Illustrate what is the market elasticity of demand. What is your elasticity of demand in this Cournot oligopoly.
Define fully whether inez is obligated to pay for the boat : When the boat is ready for delivery and Inez learns of the delegation and refuses to accept delivery, even though the boat is built to specifications and Define fully whether Inez is obligated to accept and pay for the boat
Changing conditions significant influence on way health : What changing conditions do you think have the most significant influence on way the health information is managed today? Why?
Neo-analytic and humanistic personalities : Define the behavioral, neo-analytic, and humanistic personalities. Explain relations between personality and culture. Which theory accounts for cultural influences on personality best? Worst?

Reviews

Write a Review

Finance Basics Questions & Answers

  Computation of present value of medical research corporation

Computation of Present value of Medical Research Corporation (MRC) was thrilled with the response he had received from drug companies for his latest discovery, a unique electronic stimulator that reduces the pain from arthritis

  Determine additional cash and value of shares

Raviv Corporation has $100 million in cash that it can use for a share repurchase. Assume instead Raviv invests the funds in an account paying 10% interest for one year.

  Explain capital budgeting involves calculation net present

Explain Capital budgeting involves calculation of net present value and The following information is associated with this project

  Incorrect financial projections

What would happen if your financial projections were based on incorrect information? For example if your Booked AR is significantly higher this quarter than the actual AR and cash inflows,

  Describing off-balance-sheet assets

What do you mean by off-balance-sheet assets? Recognize the 4 major categories of off-balance-sheet business and use the suitable example to describe each category.

  Budgeting for the future years

Describe how revenue sources are planned and budgeted in nonprofits. What are at least 4 of key revenue assumptions that should be made in for-profit entity?

  Estimate the expected financial impact

Suppose that the plastic gear creates additional warranty cost due higher failure rates.  The cost to the company is $50 per gear failure. Should the company still convert to the plastic gear? Estimate the expected financial impact.

  Computing share price in a year

A share of stock sells for $35 today. The beta of stock is 1.2, expected return on market is 12%. The stock is expected to pay a dividend of $0.80 in one year.

  Present value question

The Daily Tribune is performing an impairment test of its printing press as of December 31, 200X, and estimates that the press will generate net cash flows of $8,000 per year for the next 4 years.

  Earnings management

The company X has been in business for 100 years. For the last 3 years this company reported operating losses. Which set of financial statement users is most likely to be influenced by this earnings management?

  Computation of dividend per share paid

Computation of dividend per share paid and what is the most recent dividend per share paid on the stock

  Explain current dividend, current price and pe ratio

Explain Current dividend, current price and PE ratio of stock and what was the net price change for the date covered by the paper

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd