A company plans to take $1000000 bank credit for 11 years whilei=40%. After some negotiations, manager of the company convince the bank for i=38%. The decrease in interest rate result in a decrease in total debt. What is the approximate percantage of debt decrease? O a. 10% O b. 20% O c. 15% d. 8%

A company plans to take $1000000 bank credit for 11 years whilei=40%. After some negotiations, manager of the company convince the bank for i=38%. The decrease in interest rate result in a decrease in total debt. What is the approximate percantage of debt decrease? O a. 10% O b. 20% O c. 15% d. 8%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter17: The Management Of Cash And Marketable Securities

Section: Chapter Questions

Problem 1P

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

A company plans to take $1000000 bank credit for 11 years while i=40%. After some
negotiations, manager of the company convince the bank for i=38%. The decrease in
interest rate result in a decrease in total debt. What is the approximate percantage of debt
decrease?
a. 10%
O b. 20%
O c. 15%
O d. 8%

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