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Bank One extends a $3 million line of credit to Castle Corp. The stated rate of...
Bank One extends a $3 million line of credit to Castle Corp. The stated rate of...
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 95% ob 10.6% c 11.6% 123%
In exchange for a $540 million fixed commitment line of credit, your firm has agreed to...
In exchange for a $540 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1 percent per quarter on any funds actually borrowed. 2. Maintain a 4 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 13 percent of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of...
In exchange for a $500 million fixed commitment line of credit, your firm has agreed to...
In exchange for a $500 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 2 percent per quarter on any funds actually borrowed. 2. Maintain a 4 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of .2 percent of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of...
A firm has the line of credit with an interest rate of 3% and a commitment...
A firm has the line of credit with an interest rate of 3% and a commitment fee of 0.25% based on the unused portion of the line. The total funds available on the credit line equal $5,000,000. The firm expects average daily borrowings of $3,500,000. What’s the effective cost of this LOC? If the bank asks for 10% compensating balance, what’s the effective cost of this LOC? A firm is looking to raise $5,000,000 from the commercial paper (CP) market. ...
1) A firm has the line of credit with an interest rate of 3% and a...
1) A firm has the line of credit with an interest rate of 3% and a commitment fee of 0.25% based on the unused portion of the line. The total funds available on the credit line equal $5,000,000. The firm expects average daily borrowings of $3,500,000. A) What’s the effective cost of this LOC? B) If the bank asks for 10% compensating balance, what’s the effective cost of this LOC?
Mr. Fernandez has applied for a revolving credit line of $ 6 million to assist in marketing a new product line
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...
Summit Record Company is negotiating with two banks for a $157,000 loan. Fidelity Bank requires a...
Summit Record Company is negotiating with two banks for a $157,000 loan. Fidelity Bank requires a compensating balance of 24 percent, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a compensating balance of 12 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 9 percent. Compensating balances will be subtracted from the $157,000 in determining the available funds...
Summit Record Company is negotiating with two banks for a $139,000 loan. Fidelity Bank requires a...
Summit Record Company is negotiating with two banks for a $139,000 loan. Fidelity Bank requires a compensating balance of 14 percent, discounts the loan, and wants to be paid b four quarterly payments. Southwest Bank requires a compensating balance of 7 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated 12 percent. Compensating balances will be subtracted from the $139,000 in determining the available funds in part a. both banks a-1....
Mr. Fernandez has applied for a revolving credit line of $ 9 million to assist in...
Mr. Fernandez has applied for a revolving credit line of $ 9 million to assist in marketing a new product line. The terms of the loan will be as follows: (a) All the loans will be discount loans. (b) A fixed commitment fee of 0.2 percent will be charged. (c) The compensatory balance requirements will be 8 percent on the total credit line and 6 percent on the outstanding loans. (d) The bank will pay 2 percent interest on demand...
Fernandez has applied for a revolving credit line of $ 7 million to assist in marketing...
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...
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 95% ob 10.6% c 11.6% 123%
In exchange for a $540 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1 percent per quarter on any funds actually borrowed. 2. Maintain a 4 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 13 percent of the amount of the line. Based on this information, answer the following: a. Ignoring the commitment fee, what is the effective annual interest rate on this line of...
Summit Record Company is negotiating with two banks for a $139,000 loan. Fidelity Bank requires a compensating balance of 14 percent, discounts the loan, and wants to be paid b four quarterly payments. Southwest Bank requires a compensating balance of 7 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated 12 percent. Compensating balances will be subtracted from the $139,000 in determining the available funds in part a. both banks a-1....
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