Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

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.

image text in transcribed 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 why

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Algebra and Trigonometry

Authors: Ron Larson

10th edition

9781337514255, 1337271179, 133751425X, 978-1337271172

Students also viewed these Finance questions