What is the effective annual interest rate

Assignment Help Finance Basics
Reference no: EM132473523

You've worked out a line of credit arrangement that allows you to borrow up to $55 million at any time. The interest rate is .55 percent per month. In addition, 6 percent of the amount that you borrow must be deposited in a non-interest-bearing account. Assume that your bank uses compound interest on its line of credit loans.

a. What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b. Suppose you need $25 million today and you repay it in 6 months. How much interest will you pay? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Reference no: EM132473523

Questions Cloud

What is the required return : The dividends are anticipated to maintain a 0.07 growth rate forever. If the stock currently sells for $40 per share, what is the required return?
What is the current share price : If the required return on this stock is 11 percent, what is the current share price? Answer with 2 decimals (e.g. 45.45).
Describe the budget of the agency by addressing given items : You are the new budgeting and finance administrator for your local government agency. Your first responsibility is to become familiar with the agency.
What is the current share price : If the required return is 0.06 and the company just paid a $1.15 dividend, what is the current share price? Answer with 2 decimals (e.g. 45.45).
What is the effective annual interest rate : What is the effective annual interest rate on this lending arrangement?
What is the present value of the costs of operating a series : The cost of capital is 8 percent. What is the present value of the costs of operating a series of such machines in perpetuity?
Determine should the city buy the trucks : In a heavily debated City Council meeting, one year ago, Cobb County learned that by buying larger garbage trucks it could reduce labor cost for garbage.
Calculate the employee and employer portion of cpp and ei : Calculate the employee and employer portion of CPP and EI. present the entry to record Birch Company's employer benefits for the month of March.
Calculate the z-spread-constant yield spread : The one-year and two-year government spot rates are 2.10% and 3.635%, respectively. Calculate the Z-spread, a constant yield spread over a government spot curve

Reviews

Write a Review

Finance Basics Questions & Answers

  Compute the incremental income after taxes

You have been asked to assess the expected financial impact of each of the following proposals to improve the profitability of credit sales made.

  Evaluate operating cash flow

ABC, Inc is planning the purchase of new equipment that costs $128,419. The project is expected to last for 13 years.

  Ytm-ytc and hpr

What was the yield to maturity for both bonds on November 1, 2009? What was the yield to call for both bonds on November 1, 2009? At what price did you sell each bond on November 1, 2010?

  What is the trader gain or loss

1. A trader enters into a one-year short forward contract to sell an asset for $60   when thespot price is $58. The spot price in one year proves to be $63. What is the trader's gain orloss?

  Large number of valuation methods

Comment on whether it is helpful to investors for different assets or liabilities to have appropriate methods that are appropriate for them.

  What is the probability that attendance is greater

The attendance at a baseball game at a certain stadium is normally distributed with a mean of 25,000 and a standard deviation of 1200. For any given game: a) What is the probability that attendance is greater than 27,500? b) What is the probability..

  Assess the effectiveness of using the black-scholes model

Assess the effectiveness of using the Black-Scholes model to value cap and floor type investments. Provide support for your response.

  Discuss on two projects that require an investment

Discuss on two projects that require an investment in the firm.

  What are the differential cash flows over the project life

It's been 2 months since you took a position as an assistant financial analyst at Caledonia Products. Although your boss has been pleased with your work.

  What is the minimum dollar amount

If her required effective annual return is 15%, what is the minimum dollar amount for which Mrs. M. should sell her shares?

  Internal and external communication barrier

You have successfully won a project. Give an example of a internal and external communication barrier and how they were overcome.

  What is its return on stockholders equity

What is its return on stockholders' equity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

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