Interest rate on loan with the compensating balance

Assignment Help Financial Management

Reference no: EM131818023

Suppose your firm is seeking a three year, amortizing $250,000 loan with annual payments and your bank is offering you the choice between a $257,500 loan with a $7,500 compensating balance and a $250,000 loan without a compensating balance. The interest rate on the $250,000 loan is 9.5 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.)

Reference no: EM131818023

Questions Cloud

Determine the possible iterative step that one must consider : Determine the possible iterative steps that one must consider in this process with consideration of the HR core functions and responsibilities of the client.

Larger population of students : Use software to test if the mean of differences, mother's age minus father's age, is negative for the larger population of students; first report the mean.

Prepare a separate journal entries to record the transfer : Prepare a separate journal entries to record the transfer of each proprietorship's assests and liabilities to the partnership

Compute the work-in-process inventory at july balances : Use the dates in the table to identify the status of each job. Compute the following balances for Winter Trailers: Work-in-Process Inventory at July 31

Interest rate on loan with the compensating balance : How low would the interest rate on the loan with the compensating balance have to be for you to choose it?

Discuss the current accounting period : What are the 2 methods that companies implement to adjust the outstanding accounts receivable for the current accounting period

Determine the equivalent annual cost of each : Two types of water impoundment reservoirs are being considered. determine the equivalent annual cost of each.

Demonstrates each relationship strength classification : Using the classifications from part one of this discussion; provide a real word scenario that demonstrates each relationship strength classification.

Compounded quarterly on its investment : how much will the company have to get at the end of each year in order to earn 15% per year, compounded quarterly on its investment?

User Account

All Pages