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I need help with my principles of managerial finance homework. Have to create a spreadsheet that will show calculations on a company's current liabilities. A
I need help with my principles of managerial finance homework. Have to create a spreadsheet that will show calculations on a company's current liabilities.
A company is considering manufacturing protective cases for a popular new smartphone. Management decides to borrow $ 200,000 from each of two banks, First American and First Citizen On the day of the visit both banks, the quoted prime interest rate is 7%. Each loan is similar in that each involves a 60-day note, with interest to be paid at the end of 60 days. The interest rate was set at 2% above the prime rate on First American's fixed-rate note. Over the 60-day period, the rate of interest on this note will remain at the 2% premium over the prime rate regardless of fluctuations in the prime rate. First Citizen sets its interest rate at 1.5% above the prime rate on its floating-rate note. The rate charged over the 60 days will vary directly with the prime rate. For the First American loan: a. create a spreadsheet to calculate and analyze the total dollar interest cost on the loan, assume a 365-day year b. calculate the 60-day rate on the loan c. assume that the loan is rolled over each 60 days throughout the year under identical conditions and terms. Calculate the effective annual rate of interest on the fixed-rate, 60-day First American note. For the First Citizen loan: d. calculate the initial interest rate e. assuming, that the prime rate immediately jumps to 7.5% and after 30 days it drops to 7.25% calculate the interest rate for the first 30 days and the second 30 days of the loan. f. calculate the total dollar interest cost g. calculate the 60-day rate of interest h. assume that the loan is rolled over each 60 days throughout the year under the same conditions and terms, calculate the effective annual rate of interest. i. which loan would you choose and whyStep by Step Solution
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