Answered: A bank gives6-month 7.2% interest rate…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 2P: Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for...

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A bank gives6-month 7.2% interest rate compounded monthly(the interest rate is that the bank applies to a client who deposits hismoney in the bank). This bank provides capital to investors with 22%annual loan interest rate.An investor who receives theloan from this bank wants to invest, expecting 10% annual real profit rate.Annual inflation rate is 14.6%. According to this;

a.Determine monthly loan interest rate of the bank

b.Find annual real profit rate of the bank

c.Calculate the investor's annual compoundeddiscount (profit) rate.

d.Calculate the annual realprofit rate of the depositor.

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