What is the rate of annual interest on each loan

Reference no: EM133703645

Assignment: Business Finance- Accounting

Provide detailed descriptions and show all calculations used to arrive at solutions for the following questions:

I. Community Hospital has annual net patient revenues of $150 million. At the present time, payments received by the hospital are not deposited for six days on average. The hospital is exploring a lockbox arrangement that promises to cut the six days to one day. If these funds released by the lockbox arrangement can be invested at 8 percent, what will the annual savings be? Assume the bank fee will be $2,000 per month.

II. St. Luke's Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction costs to buy and sell the securities are $2,200 and the securities will be held for three months, what required annual yield must be earned before the investment makes economic sense?

III. Your firm is considering the following three alternative bank loans for $1,000,000:

i. 10 percent loan paid at year end with no compensating balance
ii. 9 percent loan paid at year end with a 20 percent compensating balance
iii. 6 percent loan that is discounted with a 20 percent compensating balance requirement

Assume that you would normally not carry any bank balance that would meet the 20 percent compensating balance requirement. What is the rate of annual interest on each loan?

IV. An important source of temporary cash is trade credit, which does not actually bring in cash, but instead slows its outflow. Vendors often provide discounts for early payment. What is the formula to determine the effective interest rate if the discount is not utilized?

Reference no: EM133703645

Questions Cloud

Hacker that breaks into a system for malicious reasons : Someone who unlawfully breaks into an information system. 2. A computer that is being controlled from a remote location often used to launch a denial-of-service

Adverse effects and interactions : Explain in simpler terms Adverse effects and interactions. The major adverse effect is cardiotoxicity

What is the problem faced by hellobike : What is the problem faced by HelloBike? How does AntChain's solution help solve this problem? Is Blockchain technology indispensable in this solution?

Create a zero vector with the dimension equals to n : Now we have a dictionary of the most popular words. For each title in the corpora create a zero vector with the dimension equals to N

What is the rate of annual interest on each loan : Assume that you would normally not carry any bank balance that would meet the 20 percent compensating balance. What is the rate of annual interest on each loan?

Prompt the user to enter the ice thickness data : Prompt the user to enter the ice thickness data for this day for all locations. Update the Days vector with the new day and the Ice matrix with the newly record

Prompt engineering expert that is able to reverse : Prompt engineering expert that is able to reverse engineer prompts based on the text that is provided to you. I'm going to provide a specific type

Best practices should the administrator use to achieve this : reflected back and executed as part of the web page content. Which of the following best practices should the administrator use to achieve this goal

Towards community health promotion : What are the immediate and/or long-term objectives and what positive contributions could it have towards community health promotion.

User Account

All Pages