Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1. Bravo Corporation recently issued 270-day commercial paper with a face value of $2,000,000 and a simple interest rate of 11 percent. The company paid

1. Bravo Corporation recently issued 270-day commercial paper with a face value of $2,000,000 and a simple interest rate of 11 percent. The company paid a transaction fee equal to 0.4 percent of the issue, which was taken out of the issue amount before the company received any funds. Assuming there are 360 days in a year, what is the commercial paper's effective annual rate (rEAR)? (Round your answer to two decimal places.)

2. Kerry Corporation is planning to get a 270-day $500,000 simple interest loan from its bank at a quoted interest rate of 12 percent. If the bank has a 20% compensating balance requirement and Kerry currently holds no funds at the lending bank, what is the effective annual rate (EAR) of the loan? (Assume there are 360 days in a year. Round your answer to two decimal places.)

3. A revolving credit agreement is:

created because of recurring short-term liabilities such as wages and taxes that change spontaneously with operations.

the credit created when one firm buys on credit from another firm.

an outright sale of receivables.

an unsecured, short-term promissory note issued by large, financially sound firms to raise funds.

a formal, committed arrangement in which a bank agrees to lend up to a specified maximum amount of funds during a designated period.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Dividend Growth Investing Machine

Authors: Andrew P.C.

1st Edition

1521728461, 978-1521728468

More Books

Students also viewed these Finance questions

Question

3. Evaluate your listeners and tailor your speech to them

Answered: 1 week ago