Question
The financial managers at Montross Corporation are arranging the financing for working capital requirements for the upcoming year. Montrosss local bank offers a discount interest
The financial managers at Montross Corporation are arranging the financing for working capital requirements for the upcoming year. Montrosss local bank offers a discount interest loan at a quoted (simple) interest rate of 8.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Montross applies for a $300,000 loan with a nine-month term.
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 | $18,000 |
| Amount of cash received | |
| Annual percentage rate (APR) | |
| Effective annual rate (EAR) |
What is the nine-month rate if the bank charges a $100 processing fee?
6.42%
6.03%
5.78%
8.51%
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Finance And Economics Discussion Series The Effects Of Welfare Reform And Related Policies On Single Mothers Welfare Use And Employment In The 1990s
Authors: United States Federal Reserve Board, Adam Looney
1st Edition
1288711409, 9781288711406
