Question
Montross Inc. needs to raise $300,000 for a nine-month term. Montrosss bank has offered to lend Montross the money at a 12.00% simple interest rate.
Montross Inc. needs to raise $300,000 for a nine-month term. Montrosss bank has offered to lend Montross the money at a 12.00% simple interest rate. Montross will receive the $300,000 upon approval of the loan and will pay back the principal and interest at maturity.
Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan.
|
| Value |
|---|---|
| Interest payment | ______________ |
| Amount of cash received | ______________ |
| Annual percentage rate (APR) | ______________ |
| Effective annual rate (EAR) | ______________ |
Suppose the terms of the loan require that Montross maintain a compensating balance equal to 20% of the loan balance, and Montross will have to borrow the compensating balance from the bank.
Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of the loan considering the compensating balance requirement.
|
| Value |
|---|---|
| Interest payment | ______________ |
| Amount of cash borrowed | ______________ |
| Annual percentage rate (APR) | ______________ |
| Effective annual rate (EAR) | ______________ |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Accounting A Management Perspective
Authors: Nelson Macwan
1st Edition
6206142191, 978-6206142195
