Question
(Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry
(Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 16 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $90,000 for a period of four months, what is the effective cost of the bank loan? Assume paymaster does not have sufficient funds in the bank to satisfy the compensating balance requirement.
The effective cost or APR of the bank loan is?
______% ROUND 2 DECIMAL PLACES
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Enron And World Finance A Case Study In Ethics
Authors: P. Dembinski, C. Lager, A. Cornford, J. Bonvin
1st Edition
1403947635, 978-1403947635
