Finding the effective interest rate

Reference no: EM1334381

Mime Theatrical Supply is in the process of negotiating a line of credit with two local banks. The prime rate is currently 8 percent. The terms follow:
Bank Loan Terms
1st National

1 percent above prime rate on a discounted basis and a 20 percent compensating balance on the face value of the loan.

2nd National

2 percent above prime rate and a 15 percent compensating balance.

(a) Calculate the effective interest rate of both banks.
(b) Recommend which bank's line of credit Mime Theatrical Supply should accept.

Reference no: EM1334381

Questions Cloud

Calculate the return if the bank compounds annually : Assume you deposit $2,000 for 5 years at a rate of 8 percent. Calculate the return (A) if the bank compounds annually (n=1) Round answer to the hundreths place.

Explain next generation marketing feedback and control : Explain Next Generation Marketing Feedback and Control and Net Generation uses all types of feedback and controls

Effective cost of trade credit and annual interest rate : The D. J. Masson Corporation needs to raise $500,000 for 1 year to supply working capital to a new store. What is the effective annual interest rate of the costly trade credit?

Explain marketing and technology : Explain Marketing and Technology and What types of new technologies are organizations using to market their products and services to both buyers and sellers

Finding the effective interest rate : Mime Theatrical Supply is in the process of negotiating a line of credit with two local banks. The prime rate is currently 8 percent. The terms follow: Calculate the effective interest rate of both banks.

Explain global and domestic market decisions : Explain Global and Domestic Market Decisions and Discuss the high-level domestic and global environmental factors that may impact Pepsi's marketing decisions

Explainn what is the value of the internet : Explainn What is the value of the Internet as another channel of distribution option

Explain what type of technological infrastructure : Explain What type of technological infrastructure would you consider in developing an international marketing strategy

Explain why verizon has always had higher debt : Please describe the internet statement "Verizon has always had higher debt than some of its peers. There was some discussion about this inside the industry few years ago when they were deploying their IPTV services (FiOS).

User Account

All Pages