Cullumber Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 5.50 percent and the loan agreement calls for an annual fee of 28 basis points on any unused balance for the year. If the firm borrows $2.2 million on the day the loan agreement is signed, what is the effective rate for the line of credit? (Round answer to 2 decimal places, e.g. 12.25%.)
Cullumber Cosmetics management is setting up a line of credit at the company’s bank for $5...
Blossom Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 4.00 percent and the loan agreement calls for an annual fee of 55 basis points on any unused balance for the year. If the firm borrows $1.6 million on the day the loan agreement is signed, what is the effective rate for the line of credit? (Round answer to 2 decimal places, e.g. 12.25%.
Your company has arranged a revolving credit agreement for up to $78 million at an interest rate of 1.47 percent per quarter. The agreement also requires your company to maintain a compensating balance of 4 percent of the unused portion of the credit line, to be deposited in a non-interest bearing account. Your company's short-term investment account at the same bank pays an interest rate of 0.61 per quarter. What is the effective annual interest rate if your company borrows...
Fernandez has applied for a revolving credit line of $ 7 million to assist in marketing a new product line. The terms of the loan will be as follows: (a) All the loans will not be discount loans. (b) A commitment fee of 0.1 percent on the unused portion of the loan will be charged. (c) The compensatory balance requirements will be 5 percent on the total credit line and 4 percent on the outstanding loans. (d) The bank will...
A bank offers your firm a revolving credit arrangement for up to $66 million at an interest rate of 1.65 percent per quarter. The bank also requires you to maintain a compensating balance of 2 percent against the unused portion of the credit line, to be deposited in a non-interest-bearing account. Assume you have a short-term investment account at the bank that pays 1.00 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans....
Golden Foods, Inc. has a revolving credit agreement with its bank under which it can borrow up to $10 million at an annual interest rate of 10%. The firm is required to maintain a 20% compensating balance on any funds borrowed under this agreement and to pay a 1% commitment fee on the unused portion of the credit line. (Assume Golden has no existing funds on deposit with the bank.) Determine the EAR assuming an average of $6 million is...
A bank offers your firm a revolving credit arrangement for up to $78 million at an interest rate of 1.95 percent per quarter. The bank also requires you to maintain a compensating balance of 6 percent against the unused portion of the credit line, to be deposited in a non-interest-bearing account. Assume you have a short-term investment account at the bank that pays 1.30 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans....
(Cost of short-term bank loan) On July 1, 2015, the Southwest Forging Corporation arranged for a line of credit with the First National Bank (FNB) of Dallas. The terms of the agreement call for a $100,000 maximum loan with interest set at 1 percent over prime. In addition, the firm has to maintain a 20 percent compensating balance in its demand deposit account throughout the year. The prime rate is currently 4.5 percent. If Southwest normally maintains a $20,000 to...
A bank offers your firm a revolving credit arrangement for up to $80 million at an interest rate of 2.00 percent per quarter. The bank also requires you to maintain a compensating balance of 3 percent against the unused portion of the credit line, to be deposited in a non-interest-bearing account. Assume you have a short-term investment account at the bank that pays 1.35 percent per quarter, and assume that the bank uses compound interest on its revolving credit loans....
Mr. Fernandez has applied for a revolving credit line of $ 6 million to assist in marketing a new product line. The terms of the loan will be as follows:(a) The loan will not be a discount loan.(b) A commitment fee of 0.2 percent on the unused portion of the loan will be charged.(c) The compensatory balance requirements will be 10 percent on the total credit line and 8 percent on the outstanding loans.(d) The bank will pay 0 percent...
Bank One extends a $3 million line of credit to Castle Corp. The stated rate of interest is 9.5%. Bank One requires Castle to maintain compensating balances equal to 10% of the amount of the line. Assuming that Castle would not normally carry any deposits at the bank, what is the effective annual cost of the loan? [Note: there is no commitment fee] a 9.5% b. 10.6% c 11.6% 123%