How low would the interest rate on the loan

Assignment Help Financial Management
Reference no: EM132033954

Suppose your firm is seeking a four year, amortizing $260,000 loan with annual payments and your bank is offering you the choice between a $268,000 loan with a $8,000 compensating balance and a $260,000 loan without a compensating balance. The interest rate on the $260,000 loan is 9.8 percent.

How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Interest rate   %

Reference no: EM132033954

Questions Cloud

Determine each project payback period : Determine each project's accounting rate of return. Determine each project's payback period.
What is the expected market price of the common stock : What is the expected market price of the common stock after the announcement?
Calculate the stock coefficient of variation : Calculate the stock's expected return. Calculate the stock's coefficient of variation.
Determine the most productive way of deploying capital : There are many different scenarios that we have to determine the most productive way of deploying capital,
How low would the interest rate on the loan : How low would the interest rate on the loan with the compensating balance have to be for you to choose it?
The embodiment of the entrepreneurial spirit : You are the embodiment of the entrepreneurial spirit and want to finance a real estate project costing $1.2 million with a 70% LTV,
Calculate total interest and fees casey one stop : Calculate the total interest and fees Casey’s One Stop can expect to pay on this loan commitment.
How would you decide between two capital project : How would you decide between two capital project choices if the different analysis methods (NPV, IRR, etc.) were pointing to different options?
You are considering putting it toward your car loan : You have some extra cash this month and you are considering putting it toward your car loan.

Reviews

Write a Review

Financial Management Questions & Answers

  Relationship in time to maturity-changing required returns

Discuss the relationship between time to maturity and changing required returns.

  Based on the constant-growth dividend discount model

Jand, Inc., currently pays a dividend of $1.48, which is expected to grow indefinitely at 6%. If the current value of Jand’s shares based on the constant-growth dividend discount model is $39.16, what is the required rate of return?

  What is the after tax cost of debt

Please solve this After-tax component cost of debt problem. Assume that the federal tax rate is 40%. If the pre-tax cost of debt is 9%, what is the After Tax Cost of Debt?

  The time to purchase life insurance

You and your spouse are both 30 years old. Recently, you had your first child and you believe that now is the time to purchase life insurance. You currently owe $250,000 on your home and your take-home pay is $50,000 per year. You expect your child t..

  What rate of growth must be expected for spencer

Spencer's Supplies stock is currently selling for $60 a share. The firm is expected to earn $5.40 per share this year and to pay a year-end dividend of $3.60. If investors require a 9% return, what rate of growth must be expected for Spencer?

  Using accrual accounting and the preceding values

Using accrual accounting and the preceding values, show the firm’s net profit for the past year.

  What is the standard deviation of the stock returns

What was the stock’s return for the missing year? What is the standard deviation of the stock’s returns?

  What is the equivalent annual savings from the purchase

Gluon Inc. is considering the purchase of a new high pressure glueball. It can purchase the glueball for $120,000 and sell its old low-pressure glueball, which is fully depreciated, for $20,000. The new equipment has a 10-year useful life and will sa..

  What are the total finance charges over that four- year

Jennifer wants to buy some furniture for her new apartment. A shop offered credit at an APR of 16 percent with a maximum term of four years.

  What will the price be in three years

The Starr Co. just paid a dividend of $1.30 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year, indefinitely. Investors require a return of 14 percent on the stock. What is the current price? What will..

  Forced to buy the underlying stock-lower volatility results

If you __________, then you may be forced to buy the underlying stock. Lower volatility results in __________ Put Option prices and ______ Call Option Prices.

  What should stock price be

A call option on Jupiter Motors stock with an exercise price of $60 and one-year expiration is selling at $9. what should the stock price be?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd