Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

To finance a shipment of badminton sets, Rujisawa Import-Export is seeking a $500,000 one-year bank loan. The Marine Bank requires that Rujisawa maintain a 20%

To finance a shipment of badminton sets, Rujisawa Import-Export is seeking a $500,000 one-year bank loan. The Marine Bank requires that Rujisawa maintain a 20% compensating balance and requires four quarterly payments. The Prairie Bank requires only a 10% compensating balance but requires 12 monthly payments. In addition, the Prairie Bank discounts the loan. Both banks state that their interest rate is 9%. A) Which bank has the lowest annual interest rate? (NOTE: deduct the compensating balances from the principal in determining the annual rate.) B) If Prairie Bank eliminated its compensating-balance requirement, would your answer change?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored 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

Principles Of Finance With Excel

Authors: Simon Benninga, Tal Mofkadi

3rd Edition

0190296380, 9780190296384

More Books

Students also viewed these Finance questions

Question

Did I choose this value, or did I copy it from someone else?

Answered: 1 week ago