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You’ve worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is .576 percent per month. In addition, 3 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans.
a. What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Effective annual rate %
b. Suppose you need $17.46 million today and you repay it in five months. How much interest will you pay? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Total interest paid $
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Consider a project to supply 105 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,950,000 five years ago; if the land were sold today, it would net you $2,150,0..
You will receive a $80,000 inheritance in 10 years. You could invest that money today at 9% compounded semi annually. What is the present value of your inheritance?
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A bond is a common investment opportunity.
What was the coupon payment on this bond? Is the yield to maturity on this bond greater or less than current yield? Why? Explain
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