What is the effective rate of interest

Assignment Help Financial Management
Reference no: EM131831144

Carey Company is borrowing $325,000 for one year at 11.5 percent from Second Intrastate Bank. The bank requires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).   

a. What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

b. What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM131831144

Questions Cloud

Firms operating expenses excluding depreciation : What was the firms operating expenses excluding depreciation?
The maximum amount the couple has for down payment : Determine the maximum amount the couple has for a down payment.
Compute the present value of each alternative : Assuming you could earn 10 percent annually, compute the present value of each alternative:
Time value and personal finance problem : How much better off will you be at the end of 30 years if you decide to make the initial deposit today rather than 5 years from? today?
What is the effective rate of interest : What is the effective rate of interest? What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan?
Calculate effective rate of interest : Calculate the effective rate of interest for the following types of loans.
Valuing private firm : Valuing a Private Firm You have been asked by the owner of a small firm that produces and sells computer software to estimate the value of his firm.
What will be effect of bond new price if market yields rise : What will be effect of the bond’s new price if market yields rise by 0.1%? What will be the bond’s price if the market yields rise by 2%?
Tripled his money in the same amount of time : What if he had said that he TRIPLED his money in the same amount of time - what would the rate of return have to be?

Reviews

Write a Review

Financial Management Questions & Answers

  Explaining the relationship between finance and accounting

Write two paragraphs explaining the relationship between finance and accounting,

  Chains? in-house instead of purchasing them from supplier

what is the net present value of the decision to produce the chains? in-house instead of purchasing them from the? supplier?

  What is cost of equity

Shadow Corp. has no debt but can borrow at 7.4 percent. The firm’s WACC is currently 9.2 percent, and the tax rate is 35 percent. What is Shadow’s cost of equity? what will its cost of equity be? If the firm converts to 60 percent debt, what will the..

  The acquiring company enters on its balance sheet

Using fair value accounting for goodwill, under FAS 141R, determine the amount of goodwill that "the acquiring company" enters on its balance sheet in the following situation: Talmadge Corporation is acquiring the target Tyler, Inc. in a merger. What..

  Copyright related to textbook that was developed internally

Splish Brothers Industries acquired two copyrights during 2017. One copyright related to a textbook that was developed internally at a cost of $16,000. This textbook is estimated to have a useful life of 4 years from September 1, 2017, the date it wa..

  What is the value of stock today at discount rate

What is the value of this stock today at a discount rate of 12 percent?

  Calculate and plot the levelized cost of energy

Calculate and plot the levelized cost of energy (LCOE) as a function of the debt rate for 4% less tha no requal to i_debt less than o requal to 12% for a large

  Meeting regarding the pro forma forecasting of business

You are in a meeting regarding the pro forma forecasting of business for your company, Ferd Berfel Franistats Incorporated.

  What are your put options worth-what is your net profit

Suppose you purchase five put contracts on Testaburger Co. The strike price is $54, and the premium is $3. If, at expiration, the stock is selling for $47 per share, what are your put options worth? What is your net profit?

  Earnings per share be immediately after the rights offering

Walker Machine Tools has 6.2 million shares of common stock outstanding. The current market price of Walker common stock is $66 per share rights-on. The company’s net income this year is $21.00 million. What are the earnings per share and price-earni..

  Calculate the reversion value at the end of year five

Consider a building with a very long economic life. Assume at the end of year 6, NOI will be $80,000 as is expected to grow at a rate of 2 percent per year. You company’s required rate of return is 12 percent. As part of your analysis, you must calcu..

  Compute the firms price earnings ratio

Cisco Systems had net income of $4.401 billion and, at year end, 6.735 billion shares outstanding. In addition, the company’s EBITDA was $6.834 billion and its share price was $22.36. Compute the firm's price earnings ratio and the price-EBITDA ratio..

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