Homework Answers
| Marine Bank | Mclean national bank | |||||
| Principal | 800000 | 800000 | ||||
| Interest rate | 7% | 8.25% | semi annually | |||
| Compensating rate (quarterly) | 15% | 0 | ||||
| Interest expense for Marine bank | ||||||
| For 1st 3 quarters | 42,000.00 | |||||
| Last quarter | 30,000.00 | |||||
| total interest expense | 72,000.00 | |||||
| EAR | 9.00% | |||||
| Interest expense for Mclean National Bank | ||||||
| For 1st half year | 33,000.00 | |||||
| For 2nd half year | 34,361.25 | |||||
| total interest expense | 67,361.25 | |||||
| EAR | 8.42% | |||||
| Printing Press should take loan from Mclean national bank as EAR is lower at 8.42% vs 9% offered by Marine bank | ||||||
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Printing Press Manufacturing needs to borrow $800,000 in order to finance its n Two banks they...
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A company that needs to borrow $1000000 is offered different terms from 2 banks. Bank A expects the load to be amortized with annual payments at an annual interest rate of i=.08. Bank B requires annual interest payments at a rate of i=.06 and annual deposits into a sinking fund that earns interest at i=.02. In both cases the loan is to be paid off in 10 years. Which bank is offering the better deal? Calculate the total annual cost...
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Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 9.5% subject to a 9.8% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 9.5% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate...
P16-13 (similar to) Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000...
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1). TVM and bond valuation questions (1 mark each): COMPANY IS CSL a. Your case company has just ...
1). TVM and bond valuation questions (1 mark each):
COMPANY IS CSL
a. Your case company has just made a large sale on an instalment
contract. The contract requires the customer to pay your case
company the amount shown in Table 1 (page 4 of this document) at
the end of every month for 4 years. Your case company would like
the cash now for an investment and so has asked its bank to
discount the instalment contract and pay...
Assume that you want to borrow $800,000 in order to purchase a new car. As you are a fresh graduate, you can only find one lender, Come-On Finance Limited, willing to grant you an auto loan. In fact, a friend of yours can also give you a helping hand. You are now comparing the following loans under different terms offered by the two parties. Loan 1: Borrow $800,000 from Come-On Finance as an add-on 4% simple interest loan, with quarterly...
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 9.5% subject to a 9.8% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 9.5% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate...
P16-13 (similar to) Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.6% subject to a 9.7% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.6% with discount-loan terms. The principal of both loans would be payable at maturity as a single...
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $ 148,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.9% subject to a 9.6% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.9% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a....
Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $153,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.6% subject to a 10.4% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.6% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate...
11. Bank loans Short-term financing through bank loans Consider this case: Gizmonic Institute Corp. needs to take out a one-year bank loan of $600,000 and has been offered loan terms by two different banks. One bank has offered a simple interest loan of 10% that requires monthly payments. The loan principal will be paid back at the end of the year. Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments. Based on a 360-day...
1). TVM and bond valuation questions (1 mark each):
COMPANY IS CSL
a. Your case company has just made a large sale on an instalment
contract. The contract requires the customer to pay your case
company the amount shown in Table 1 (page 4 of this document) at
the end of every month for 4 years. Your case company would like
the cash now for an investment and so has asked its bank to
discount the instalment contract and pay...
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