Find effective interest rate for fidelity and southwest bank

Assignment Help Financial Econometrics

Reference no: EM13333216

Summit Record Company is negotiating with two banks for a $136,000 loan. Fidelity Bank requires a 14 percent compensating balance, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a 7 percent compensating balance, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 10 percent.

1. Calculate the effective interest rate for Fidelity Bank and Southwest Bank.

2. Which loan should Summit accept?

3. Recompute the effective cost of interest, assuming that Summit ordinarily maintains $19,040 at each bank in deposits that will serve as compensating balances.

Reference no: EM13333216

Questions Cloud

What would be the overall margin on the order : What was the absorption costing net operating income last year and what would be the overall margin on the order?

Define an extraction of an aqueous solution : Suppose that you are performing an extraction of an aqueous solution with an organic solvent that has a density less than water. propose a method to identify and collect only the organic solvent. assume that water and you solvent of interest are n..

What is the speed and direction of the third piece : A firecracker in a coconut blows the coconut into three pieces. Two pieces of equal mass fly off south and west, What is the speed and direction of the third piece

What price-quantity combination maximizes your firm : You are the manager of a monopoly and your demand and cost functions are given by P = 200 – Q and C(Q) = 2,000 + 3Q^2, respectively. I answered a & b, just need help with the others.

Find effective interest rate for fidelity and southwest bank : Summit Record Company is negotiating with two banks for a $136,000 loan. Fidelity Bank requires a 14 percent compensating balance, discounts the loan, and wants to be paid back in four quarterly payments.

Explain the anode is electrode where oxidation occurs : In an electrochemical cell, which of the following statements is FALSE? A. The cathode is the electrode where reduction occurs. B. The anode is electrode where oxidation occurs. C. A spontaneous electrochemical cell is called a galvanic cell. D. A..

How far from its base did the diver hit the water : A diver running 2.5m/s dives out horizontally from the edge of a vertical cliff and 2.9s later reaches the water below. How far from its base did the diver hit the water

Estimate of the total variable cost per unit : The company's degree of operating leverage is 8. At this sales level, fixed expenses - Estimate of the total variable cost per unit?

What is the greatest speed the wood ball can have : A 20.0 kg wood ball hangs from a 2.0-m-long wire. The maximum tension the wire can withstand without breaking is 400.0 N. What is the greatest speed the wood ball can have

User Account

All Pages