Interest rate on the loan with the compensating balance

Assignment Help Financial Management
Reference no: EM131461983

Suppose your firm is seeking a six-year, amortizing $730,000 loan with annual payments and your bank is offering you the choice between a $773,000 loan with a $43,000 compensating balance and a $730,000 loan without a compensating balance. The interest rate on the $730,000 loan is 9.0 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. Round your final answer to 2 decimal places.)

Reference no: EM131461983

Questions Cloud

How does research affect clinical practice : How does research affect clinical practice? Is all research equally trustworthy? Explain your answer
Considering two new investments-earthmoving equipment : Keller Construction is considering two new investments. Project E calls for the purchase of earthmoving equipment.
Which of the given is a type of system documentation : Which of the following is a type of system documentation? Which of the following influences most of the costs associated with maintaining a system?
Which theory or theories are being used by jessica : Which theory or theories are being used by Jessica, Marco, Maria, and Dr. Wilson to determine the moral status of the fetus? Explain.
Interest rate on the 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?
Bottle of hydrochloric acid of unknown concentration : Suppose your instructor handed you bottle of hydrochloric acid of unknown concentration. The chemistry department was considering using it for summer program.
Description of the main components : A description of the main propositions, A description of the main components and An analysis of the strengths and limitations
How has religious art changed compared to each : How has religious art changed compared to each, based on your observations as to how each artist used the art element you have focused on exploring?
What are the five advantages of small business : The two college students who started Newbury Comics have become serious business owners. Mike Dreese and John Brusger started Newbury Comics in 1978 with $2,000

Reviews

Write a Review

Financial Management Questions & Answers

  Zero-coupon bonds could be bought for the lowest price

Which of the following risk-free, zero-coupon bonds could be bought for the lowest price?

  Earnings before interest and taxes and net income decrease

(Leverage and EPS) You have developed the following proforma income statement for your corporation: Sales $45832000 Variable costs (22756000) Revenue before fixed costs $23076000 Fixed costs (9105000) EBIT $13971000 Interest expense (1317000) Earning..

  Fresh off excitement-investment using straight line method

Fresh off the excitement of the 2012 London Olympic Games, you decide that you want your firm to take advantage of the profits to be made for the 2016 games in Rio de Jeneiro. This $6 million is the after-tax terminal value that is in year 4 (that is..

  Company bonds in new pastor requires rate of return

Green Valley company Bonds in new pastor requires rate of return is 8.50 percent.

  Cost of capital rising faster than its return on assets

In the 2010 10-K Frontier’s management wrote, If the interest we pay on deposits and other borrowings increases at a faster rate than the interest we receive on loans and other investments, our net interest income, and therefore earnings, could be ad..

  Determine the aftertax cost of debt

Russell Container Corporation has a $1,000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $120 and is currently selling for $820 per bond. Compute the yield to maturity on the old issue and use th..

  Assume that the risk-free rate of interest

Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 3% and the market risk premium is 7%.

  Calculate the expected return on equity for mec shareholders

calculate the expected return on equity for MEC shareholders under the current all-equity capital structure.

  Consider european put option

Consider a European put option with K=$50, T=1 year, 4= 30%, and r=1%. Plot the price of the put option as a function of S(0) between 0 and $75. On the same graph also include a plot of (K-s)+.

  Calculate the standard deviation in the anticipated returns

James Fromholtz is considering whether to invest in a newly formed investment fund. The fund’s investment objective is to acquire home mortgage securities at what it hopes will be bargain prices.  Based on these potential outcomes, what is your estim..

  How many dollars will cash management system free up

Nicholas Birdcage Company of Hollywood ships cages throughout the country. Nicholas has determined that through the establishment of local collection centers around the country, he can speed up the collections of payments by one and one-half days. If..

  Annual rate of return

Suppose you are committed to owning $188229 Ferrari. If you believe your mutual fund can achieve 11.1 percent annual rate of return and you want to buy car

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