Your firm's bank has offered you two options for short-term financing in the amount of $400,000....
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Your firm's bank has offered you two options for short-term financing in the amount of $400,000. The first option is a committed line of credit with a commitment fee of 0.5% (EAR) and an interest rate of 8% (APR, compounded quarterly). The second option is a loan with a 5% compensating balance and an interest rate of 7.6% (APR, compounded quarterly). If you need $380,000 in financing at the beginning of the year and plan to pay it back at the end of the year, which option has a lower effective annual rate of interest? Answer: The EAR of 8% APR compounded quarterly is %. (Round to two decimal places.) The EAR of 7.6% APR compounded quarterly is %. (Round to two decimal places.) The EAR for the first option is %. (Round to two decimal places.) The EAR for the second option is %. (Round to two decimal places.) Choose the (answer either "first" or "second") option because it has the lower effective annual rate of est. Your firm's bank has offered you two options for short-term financing in the amount of $400,000. The first option is a committed line of credit with a commitment fee of 0.5% (EAR) and an interest rate of 8% (APR, compounded quarterly). The second option is a loan with a 5% compensating balance and an interest rate of 7.6% (APR, compounded quarterly). If you need $380,000 in financing at the beginning of the year and plan to pay it back at the end of the year, which option has a lower effective annual rate of interest? Answer: The EAR of 8% APR compounded quarterly is %. (Round to two decimal places.) The EAR of 7.6% APR compounded quarterly is %. (Round to two decimal places.) The EAR for the first option is %. (Round to two decimal places.) The EAR for the second option is %. (Round to two decimal places.) Choose the (answer either "first" or "second") option because it has the lower effective annual rate of est.
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Answer rating: 100% (QA)
EAR 1APRnn 1 n number of compoundings 1 EAR 1844 1 824 2 EAR 17644 1 782 3 commitment charges will ... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
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