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What is the loan effective interest rate for thursday bank

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Reference no: EM132973253

Thursday Bank made a loan of P5,000.00 to a borrower on January 1, 2011. The loan has a ten percent interest rate that is due yearly beginning December 31, 2011. The loan will be matured in five years, on December 31, 2015. Thursday Bank incurs a direct loan origination cost of P39,400 and an indirect loan origination cost of P10,000. In addition, Thursday charges an 8-point nonrefundable loan origination fee to the borrower. (Round off present value factors to four decimal places.)

Problem 1: What is the loan's effective interest rate?

a) 12.00%

b) 11.94%

c) 10.00%

d) 9.80%

Problem 2: In 2011, what is the interest income to be recognized?

a) P500,000

b) P555,138

c) P493,861

d) P556,728

Problem 3: As of Dec. 31, 2011, what is the carrying amount of the loan?

a) P5,000,000

b) P5,033,261

c) P4,696,128

d) P4,704,538

Reference no: EM132973253

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