Question 16 Covidfree Corp. has a credit line of P1,500,000. The bank requires compensating balance of 15% on outstanding loan and 10% on unused loan. The corporation borrows P1,200,000 at 20% interest. What is the effective interest rate ? 20% 21% 23.5%
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- Problem 6 INTEREST COST. Ajax Corporation is deciding whích of two banks to borrow from on a 1-year basis. Bank A charges an 18 percent interest rate payable at maturity. Bank B charges a 17 percent intereșt rate on a discount basis. Which loan is cheaper? Problem 7Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. a. The nominal annual rate on the loan was 11.25%. What is the true effective rate? b. What would be the effective cost of the loan if the note required discount interest? c. What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments?A bank offers a loan that will requires you to pay 8% interest compounded semiannually. Which of the following is closest to the EAR charged by the bank? A. 8.16% Your answer is correct. B. 9.79% C. 6.53% D. 16.32%
- A financing company charges 1.5% per month on a loan. Find the equivalent effective rate of interest. 19.5618% 18.5618% 17.5618% 16.5618%QUESTION 16 A Bank lends a Nesta company. R500 000 for one year at 6.48% and requires a compensating balance of 10% of the face value of the loan. The effective annual interest rate associated with the loan is ... 7.00%. 7.20%. 8.00%. 8.90%.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%
- Accounts receivable as collateral, cost of borrowing Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen eight accounts totaling $200,000 that it will accept as collateral. The bank's terms include a lending rate set at prime + 3.5% and a 1.5% commission charge. The prime rate currently is 9%. a. The bank will adjust the accounts by 10% for returns and allowances. It then will lend up to 90% of the adjusted acceptable collateral. What is the maximum amount that the bank will lend to Scientific Software? b. What is Scientific Software's effective annual rate of interest if it borrows $120,000 for 12 months? For 6 months? For 3 months? (Note: Assume a 365-day year and a prime rate that remains at 9% during the life of the loan.) a. The maximum amount that the bank will lend to Scientific Software is $ (Round to the nearest dollar.)१२:५9 AA A ezto.mheducation.com Chapter 18 - Pr.. i Saved Help Save & Exit Submit 4 Good Deal Bank offers your firm a discount interest loan at 7.75% for up to $25 million and, in addition, requires you to maintain a 5% compensating balance against the amount borrowed. Skipped What is the effective annual interest rate on this lending agreement? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Effective annual interest rate |%QUESTION 6 This year your company has $34 million of credit sales and average receivables of $7 million. Your company factor receivables by discounting 1%. What is the APR of factoring the receivables? 1.01% 1.00% 4.91% 5.00% 4.80%
- MULTIPLE CHOICE Milch Corporation sells on terms of net/90. Their accounts receivable are on average 20 days past due. If annual credit sales are P650,000, what is the company’s average investment in accounts receivable? *A. P168,611.11B. P178,611.11C. P188,611.11D. P244,444.00E. P198,611.1117. Four banks offer different terms for an $8000 loan. Which option should the customer choose to pay the least amount of interest? a. 32 monthly payments of $278.44 at 8% annual interest, compounded monthly b. 34 monthly payments of $260.08 at 7% annual interest, compounded monthly c. 36 monthly payments of $248.85 at 7.5% annual interest, compounded monthly d. 40 monthly payments of $222.99 at 6.5% annual interest, compounded monthlyIA - Receivable Financing 10. Problem Solving. A company pledged its entire accounts receivable amounting to P2,500,000 to a financing institution to a loan approved for P2,000,000. The term of the loan requires the company to pay the principal when it becomes mature 4 years from now and also to pay 12% annual interest every end of the year. Should the company has made no collateral for the loan, interest rate could have been 18%. Assuming the transaction occurred on January 1, 20A, compute the total amount of expense that should be deducted from the current year’s income of the company. Round off final answer to the nearest peso.