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Compensating balance versus discount loan
Weathers Catering Supply, Inc., needs to borrow $150,000 for 6 months. State Bank has offered to lend the funds at a 9% annual rate subject to a 10% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the
funds at a 9% annual rate with discount-loan terms. The principal of both loans would be payable at maturity as a single sum.
a. Calculate the effective annual rate of interest on each loan.
b. What could Weathers do that would reduce the effective annual rate on the State Bank loan?
The standard deviation of the market-index portfolio is 15%. Stock A has a beta of 2.00 and a residual standard deviation of 25%.
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This price should be not too low and not too high, this can be tricky. Consider and comment on the following:
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The Alpha Company has issued a total of 15,000,000 shares of common stock at par(its value to the firm is $15,000,000. The dividend yield is 7%. The company also has $5,000,000 of bonds(also sold at par) with a coupon rate of 5%. The tax rate for ..
Smith and Weston has 55,000 shares of common stock outstanding at a price of $31 a share. It also has 3,000 shares of preferred stock outstanding at a price of $62 a share. The firm has 8 percent, 12-year bonds outstanding with a total face value of ..
Consumers' choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in improving your decision making.
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