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A firm had a Floating rate loan from a bank to be paid at maturity with the following data: Loan amount = $160,000 Time to
A firm had a Floating rate loan from a bank to be paid at maturity with the following data:
Loan amount = $160,000
Time to Maturity = 180 days, year has 360 days.
Interest rate = Prime Rate + 2% increment (risk premium).
The prime rate is expected to have the following values:
the prime rate = 9% for the first 90 days.
the prime rate = 12% for the next 90 days.
The interest amount for the first 90 days
..
The interest amount for the next 90 days
..
Total interest rate
.
Effective Interest rate for 180 days
Effective Annual Interest rate
.
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