Based on the optimal interest rate and the estimate for loan losses what will charge on its commercial loans to offset its expected loan losses?
Q: You want to borrow $77,000 from your local bank to buy a new sailboat. You can afford to make…
A: Compound = Monthly = 12Present Value = pv = $77,000Monthly Payment = p = $1300Time = t = 78
Q: 1. Let the annual interest rate be 6%. Compute 87 Enter an answer correct to 6 decimal places. äz…
A: Present value (PV) is a financial concept that measures the present value of future income,…
Q: What is your estimate?
A:
Q: 1. You are making forecasts for two securities that prof both securities, calculate the cash flow…
A: Present value refers to the method which shows the current value of an asset that will be present at…
Q: Consider a stock that will have dividend growth rates in the next three periods of 13%, 9%, and 4%,…
A: We will use the dividend discount model here. As per the dividend discount model the value of a…
Q: Sensitivity Exercise: Your customer operates a hotel with a small water park in Fargo. The water…
A: The problem case focuses on performing the sensitivity analysis for the firm to identify the impact…
Q: Avicorp has a $10.4 million debt issue outstanding, with a 6.1% coupon rate. The debt has…
A: Effective Annual Return (EAR) is an important financial metric used to determine the annual income…
Q: Vandelay Industries is considering the purchase of a new machine for the production of latex.…
A: Equivalent annual cost refers to the cost incurred for owning, operating, and the maintenance of an…
Q: When you begin your new job, your employer says they will match any 401k deposits you make by 50% up…
A: Employee contribution to 401K refers to the amount of money an employee chooses to contribute from…
Q: You are planning to save $1.5 million for retirement over the next 34 years. (a) If you are earning…
A: Savings = $1,500,000Working years = 34Interest rate = 7%Retirement years = 24Inflation rate =2%To…
Q: A company has net income of $50000 1500 shares of common stock outstanding, and stock price is…
A: Net income = $500,000Number of shares of common stock outstanding = 150,000Market price = $41
Q: If the monthly rate is 6.08 %, what is the APR? Enter your answer using percent expression with two…
A: Compound = n = Monthly = 12Interest Rate = r = 6.08%
Q: Sun Brite has a new pair of sunglasses it is evaluating. The company expects to sell 5, 700 pairs of…
A: Operating cash flow refers to the cash flow that a company generates from its business operations.…
Q: Tool Manufacturing has an expected EBIT o 69,000 in perpetuity and a tax rate of 23 percent. The…
A: Modigliani-Miller Proposition I (MM Proposition I) is a fundamental concept in corporate finance,…
Q: Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for…
A: The term structure offers information about what the market anticipates will happen to interest…
Q: P4-7 Calculating Sustainable Growth [LO3] The most recent financial statements for Bello Company are…
A: Net income = $5,776Equity = 29,260Dividend payout ratio = 32%
Q: Given the following information pulled from a film is their Asset Turnover ratio? (round to the…
A: Asset turnover ratio refers to the ratio which is calculated by taking net sales as the nuerator…
Q: You just won a prize that comes with two payout choices. The first option is to get $140,000 right…
A: The time value of money is a concept in finance that evaluates the worth of money in terms of the…
Q: Capital Structure Debt @ 11% Common stock, $10 per share Total Common shares Operating plan Sales…
A: Degree of Combined leverage is used to calculate the optimum capital structure of the firm by…
Q: Hassnein recently deposited $34,000 in a savings account paying a guaranteed interest rate of 5…
A: Savings account:A savings account is a financial product offered by banks and credit unions that…
Q: Discussion Questions on Fraud Prevention from Chapter 4 Fraud Examination 4th Edition 1. How do…
A: Creating a culture of honesty, openness, and assistance within an organization is crucial for fraud…
Q: Ezze Mattress needs to raise $200,000 for 6 months. The bank quotes a discount interest rate of 7.5%…
A: Effective annual return (EAR) is a financial measure that expresses the annual rate of return or…
Q: Find the present value of the following stream of a firm's cash flows, assuming that the firm's…
A: The estimation of the sum of the future sum of money at the current date is referred to as the…
Q: Future value of a portfolio. Rachel and Richard want to know when their current portfolio will be…
A: A portfolio is a combination of diverse securities. It consists of constituents that have low…
Q: 14. (Continuing with the situation described in the preceding question.) Consider the model of a…
A: The objective of the question is to understand how the introduction of a sick pay policy will affect…
Q: What is the present value of a $25,000 lump sum to be received eleven years from now if the rate is…
A: Future Value = fv = $25,000Time = t = 11Interest Rate = r = 7%
Q: Suppose you borrowed $20,000 at a rate of 9.2% and must repay it in 5 equal installments at the end…
A: We take loans to buy large ticket items like a car or a house. The loan is repaid using fixed…
Q: Your son Tommy was just born today (Year 0), and you are plannjng for his college education. You…
A: The tuition fee per year is $2,500.The growth rate for the first 10 years is 4% per annum.The growth…
Q: Kim buys a car by putting a down payment of $2000 and monthly payments of $128 for the next 6 years.…
A: Given:Down payment (D): $2000Monthly payment (PMT): $128Annual interest rate:10%Compounded…
Q: A couple has just purchased a home for $354,000.00. They will pay 20% down in cash, and finance the…
A: Cost of home = $354,000Downpayment = 20%Mortgage rate = 3.96%Mortgage term = 30 years
Q: If a bond's yield to maturity does not change, the return on the bond each year will be equal to the…
A: The yield to maturity calculates a bond's annualized return on investment by taking into account…
Q: Dreamz Unlimited INC has accounts payable days of 30 , inventory days of 60 , and accounts…
A: Accounts payable days = 30 daysInventory days = 60 daysAccounts receivable days = 35 daysThe Cash…
Q: What would you prefer to receive if the interest rate is 20%? OA. $64 one year from now B. $95 four…
A: Display esteem (PV) may be a budgetary concept utilized to evaluate the current worth of future cash…
Q: In order to accurately assess the capital structure of a firm, it is necessary to convert its…
A: Information in the question:Par Value =$1000Coupon rate=8.3% (payable semi-annually)N=10…
Q: Ann receives an unsolicited credi card in the mail and tosses it on her desk. Without Ann's…
A: The question is asking about the liability of a person (Ann) when an unsolicited credit card she…
Q: Martinez Corporation issues $630,000 of 9% bonds, due in 11 years, with interest payable…
A: Issue price of bonds would be the present value of the interest annuity & maturity amount at…
Q: 5-year Treasury bonds have a nominal yield of 1.80%. The inflation premium (IP) is 2.09%, and the…
A: The real risk free rate can be determined by deducting the maturity risk premium from the real rate…
Q: Thornton Manufacturing Company has an opportunity to purchase some technologically advanced…
A: The IRR of a project refers to the measure of the project's profitability calculated by finding the…
Q: Your son Tommy was just born today (Year 0), and you are planning for his college education. You…
A: Periodic deposit refers to an amount that is deposited at every period for the repayment of a loan…
Q: The most recent financial statements for Bradley, Inc., are shown here (assuming no income taxes):…
A: Variables in the question:Current year sales=$9200Projected sales next year=$10212Assets and costs…
Q: Consider the following data. Period 1 2 3 4 5 5.2 What is the mean growth rate over these five…
A: PeriodRate of return1-5.8%0-8.0%3-3.8%42.0%55.2%
Q: What is a fair purchase price for a zero- coupon bond with 14 years to maturity, a face value of…
A: A zero coupon bond is a type of bond that does not pay periodic interest payments to the…
Q: A friend asks to borrow $53.00 from you and in return will pay you $56.00 in one year. If your bank…
A: Present value refers to the discounted value of future cash flows.future value is the compounded…
Q: Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either…
A: End of year cash flow: Probability$75,000 with 25% probability$125,000 with 50% probability$140,000…
Q: SMN Inc.'s bonds currently sell for $1,123. They have a 11-year maturity, an annual coupon of 7.05%,…
A: Capital gains yield is the increase in price or the price appreciation for a bond. The yield is…
Q: A company has EBIT of $30,000, depreciation expense of $3,000, interest expense of $4,000, and taxes…
A: EBIT = $30,000Depreciation expense = $3,000Interest expense = $4,000Taxes = $11,000 EBIT (Earnings…
Q: Dog Up! Franks is looking at a new sausage system with an installed cost of $725,000. This cost will…
A: Cost of system = $725,000Project's life =7 yearsScrap value = $99,000Yearly savings =…
Q: A company reports net accounts receivable of $152,000 on its December 31, Year 4 balance sheet. The…
A: Here,Net accounts receivables is $152,000Allowance for doubtful debts is $18,000Allowance for…
Q: Ten years ago, Sarah and Ben bought a house in Cambridge, Ontario for $600,000. They made a down…
A: To find out how much equity Sarah and Ben have in their home, we need to calculate the current value…
Q: Armin's wonderful parents established a college savings plan for him when he was born. They…
A: Compound = Monthly = 12Payment = p = $57Interest Rate = r = 8.2 / 12 %Time = t = 18 * 12 = 216
a bank has a commercial loan portfolio of $50 million dollars. based on historic trend analysis it estimates
that 50% of outstanding principal is not paid back. the bank determines 7% is the optimal interest rate to
charge on consumer loans. Based on the optimal interest rate and the estimate for loan losses what will
charge on its commercial loans to offset its expected loan losses? show your answer to four decimal
places in a numeric format (if answer is 9.75% enter is .0975).
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- Assume a bank’s review of its historical loan losses has been estimated at 1.33% for its auto loans. The bank currently has gross auto loans of $2,000,000. If the bank determines that the optimal or desired rate (r) for its auto loans is 4.5%, what rate should it charge to compensate for its expected losses?Suppose a bank has the following Balance Sheet Assets Liabilities RSA = 120 RSL = 90 FRL = X FRA = 110 (Fixed rate liabilities can be found if needed by determining what number it must be to balance the balance sheet.) Suppose all the Assets and Liabilities were set last year when the interest rate was 10, if the interest rate has changed by 2% since that time what is the current cost from all of the bank's liabilities? Your Answer:A bank has estimated its expected (predicted) loan loss rate on its consumer loans at 3.25%. If the bank wishes to earn 8% on it consumer loans, what rate should it charge its customers?
- You are shopping around for different bank accounts and have found several different banking institutions offering different types of interest. Calculate the effective rate of return (also known as the annual percentage yield (APY)) of each bank account. Hint: rE = (1+ 5)" – 1 (Enter your answers as a percentage rounded to 2 decimal places.) (a) Wesbanco offers an account 7.28 % interest compounded daily. APY = Number (b) PNC offers an account with 7.29 % interest compounded weekly. APY = Number (c) United Bank offers an account with 7.25 % interest compounded monthly. APY = Number % (d) BB&T offers an account with 7.32 % interest compounded quarterly. APY = Number (e) Navy Federal offers an account with 7.34 % interest compounded semi-annually. APY = Number (f) Assuming our goal is to have the best return, which account should we choose? O Wesbanco O PNC O United Bank BB&T O Navy FederalVan Buren Resources Inc. is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity. a. Calculate the loan’s annual financing cost. b. Calculate the loan’s annual percentage rate. c. What is the reason for the difference in your answers to Parts a and b?Assume a bank’s review of its historical loan losses has been estimated at 2% for its auto loans. The interest rate is 6%. The bank currently has gross auto loans of $1,000,000. If the bank determines that the optimal or desired rate (r) for its auto loans is 7.8% 12% 13% 6.44% 9.13% 8.16% 10.68%
- A bank lends some money to a business. The business will pay the bank a single payment of $180,000 in ten years time. How much greater is the present value (PV) of this payment if the interest rate is 8% rather than 7%? A. $9,754 B. $6,502 C. $11,379 D. $8,128 Please use financial calculater variable entries.Use the following to answer questions 3-4: Use balance sheet available for an FI (all in market values). Consumer loans $150 m Liabilities $300 m Commercial Loans $250 m Equity $100 m Total Assets $400 m Total Liabilities & Equity $400 m The average duration of the loans is 8 years. The average duration of the liabilities is 2 years. 3. What is the duration gap of the bank's portfolio? A. 10 years B. 6.3 years C. 6.5 years D. 7.98 years E. 8.0 years 4. What is the change in the value of the FI's equity for a 1 percent increase in interest rates from the current rates of 0.07 (1.e., 7 percent)? Assume flat term structure, and parallel shifts in yield curves. Use the duration concept. A. $17.30987 m B. $19.51818 m C. -S 22.59093 m D. -$23.11114 m E. - $24.29906 mA bank is offering a loan of $20,000 with an interest rate of 9%, payable with monthly payments over a 4-year period. a. Calculate the monthly payment required to repay the loan. b. This bank also charges a loan fee of 4% of the amount of the loan, payable at the time of the closing of the loan (that is, at the time the borrower receives the money). What effective interest rate is the bank charging?
- The amount of money (in billions of dollars) lent to customers with credit scores below 620 for subprime mortgages can be approximated by the function g(x) = 299.2e-0.15x, where x = 1 corresponds to the year 2001. (a) Find the value of subprime mortgage lending in 2011 for the described customer base. (b) If the trend continues, what is the first full year in which subprime lending falls below $4 billion? (a) Which of the following describes how to find the value of subprime mortgage lending in 2011 using the given information? Select the correct choice below and fill in the answer box to complete your choice. (Type an integer or a decimal.) A. To find the value of subprime mortgage lending in 2011, substitute g(x). for x and evaluate to find B. To find the value of subprime mortgage lending in 2011, find the intersection point of the graphs y=299.2e-0.15x and y=. The vahre of subprime mortgage lending in 2011 is represented by the y-coordinate. In 2011, the assets are about $ billion.…Universal Savings & Loan has $1,000 to lend. Risk-free loans will be paid back in full next year with 17% interest. Risky loans have a 10% chance of defaulting (paying back nothing) and a 90% chance of paying back in full with 30% interest. How much profit can the lending institution expect to earn? Expected profit from the risk-free loan is $ a real number rounded to two decimal places) (Enter a numeric response using Expected profit from the risky loan is S Now suppose that the lending institution knows that the government will "bail out" Universal if there is a default (paying back the original $1,000). What type of loans will the lending institution choose to make? What is the expected cost to the government? The lending institution will make the loan.A bank's duration gap is 1.92, and the current interest rate used to value all of the bank's assets and liabilities is 5.2%. What is the change in the bank's net worth (in % of TA) if the interest rate changes to 8%?