Formula for determining the effective interest rate

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Reference no: EM13791340

Write a brief essay that answers all the questions of the case or the weekly allowance. List references and sources using the proper APA style. Include at least one different text course book or guide additional source. Describe in detail and present all the calculations used to arrive at solutions to the following questions:

1. Community Hospital has annual net revenues of $ 150 million for patient care. Currently the payments received by the hospital are not deposited before the first six days after billing service. The hospital is exploring a deal to reduce the six days to one day and improve cash flow. If these funds released by the availability of cash could invest at a rate of 8% per annual, much would the annual savings? Suppose the bank fee is $ 2,000 per month.

2. St. Luke's Convalescent Center has a surplus of funds for $ 200,000 to be invested in marketable securities. If the transaction costs of buying therefore, for sale of the securities is $ 2,200 and the investment of these funds will be held for three months, annual minimum performance must be obtained for the investment makes economic sense?

3. Your company is considering a bank loan for $ 1,000,000, under the following three alternatives:

a) 10% percent of the loan is paid at the end of the year without compensating balance

b) loans of 9% paid at year-end with a balance of compensation of 20%

c) 6% of the loan is discounted with a requirement of 20% as compensation balance

Assume that you normally do not lead to any bank account balance of 20% that meets this requirement of compensation. What is the annual interest rate of each loan?

4. Trade credit is a temporary source of important resources that are not translated into a truly effective input, but delayed his departure. Sellers often offer discounts for early payment. What is the formula for determining the effective interest rate if the discount is not used?

Reference no: EM13791340

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