As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank at a nominal 7%, monthly compounding. To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 4% more than the bank is charging you. What APR rate should you charge your customers? Do not round intermediate calculations. Round your answer to two decimal places. 11.11 %

As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank at a nominal 7%, monthly compounding. To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 4% more than the bank is charging you. What APR rate should you charge your customers? Do not round intermediate calculations. Round your answer to two decimal places. 11.11 %

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 32P

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As a jewelry store manager, you wantto offer credit, with interest on outstanding balances paid monthly. To carry receivables,you must borrow funds from your bank at a nominal 9%, monthly compounding. To offsetyour overhead, you want to charge your customers an EAR (or EFF%) that is 3% more thanthe bank is charging you. What APR rate should you charge your customers?
As a jewelry store manager, you want to offer credit, with interest on outstanding balances paid monthly. To carry receivables, you must borrow funds from your bank at a nominal 9%, monthly compounding. To offset your overhead, you want to charge your customers an EAR (or EFF%) that is 3% more than the bank is charging you. What APR rate should you charge your customers? Do not round intermediate calculations. Round your answer to two decimal places.
You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as fallows:1. Bank A: 20% compounded quarterly.2. Bank B: 19.5% compounded daily.Which of the following statements is incorrec1?(a) The effective annual interest rate for Bank A is 18.25%.(b)The nominal annual interest rate for Bank B is 19.5%.(c) Bank B's term is a better deal, because you will pay less interest on yourunpaid balance.(d) Bank A's term is a better deal, because you will pay less interest on yourunpaid balance.
You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as follows:1. Bank A: 20% compounded quarterly.2. Bank B: 19.5% compounded daily.Which of the following statements is incorrec1?(a) The effective annual interest rate for Bank A is 18.25%.(b)The nominal annual interest rate for Bank Bis 19.5%.(c) Bank B's term is a better deal because you will pay less interest on yourunpaid balance.(d) Bank A's term is a better deal because you will pay less interest on yourunpaid balance.
You want to open a checking account with a $500 deposit. You estimate you will write 16 checks a month and use an ATM from other banks about twice a week. Bank A charges $1.40 per check if you drop under a minimum balance of $100, but you can use another bank’s ATM without a fee. Bank B has free checking but charges $1.40 each time you use another bank’s ATM. Calculate the difference in fees between the two banks over the course of a year for the following scenarios. a. your balance slips below $100 every month b. Your balance slips below $100 every other month, but you are now able to pay a bill online each month, dropping the number of checks you have to write to fifteen monthly. You also find you are only using the other bank’s ATM about once a week. c. You maintain a minimum balance of $500, write nine checks a week, and use another bank’s ATM only about once a month.
At the Central Furniture Company, customers who buy on credit pay an effective annual interest rate of 16.1%, based on monthly compounding. (a) What is the nominal annual interest rate that they pay? (b) Research the effective annual interest rates charged on a credit card that you or a friend has. How does the rate change if there is a late or skipped payment? What drives these rates? Are the rates ethical? Why or why not?
You are the loan department supervisor for a bank. This installment loan is being paid off early, and it is your task to calculate the rebate fraction, the finance charge rebate (in $), and the payoff for the loan (in $). (Round dollars to the nearest cent.) if the amount financed is = 1,900 number of payments are = 18 the monthly payment is = 125.89 payments made are = 13 slove for rebate fraction, finance charge rebate and the loan payoff
Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…
Paige is planning on depositing $1,000 in one of two different savings accounts from two financial institutions: MoneyFirst and MakeCents. The MoneyFirst account offers an interest rate of 0.15% APR, compounded monthly. The MakeCents account offers an interest rate of 0.14% APR, compounded weekly. Which is the better financial decision: the higher interest rate or the more frequent compounding? Higher interest rate More frequent compounding
Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.) Anne Teak, the financial manager of a furniture manufacturer, is considering operating a lock-box system. She forecasts that 700 payments a day will be made to lock boxes with an average payment size of $3,500. The bank’s charge for operating the lock boxes is $0.50 a check. The interest rate is 0.011% per day. a. If the lock box makes the cash available 2 days earlier, calculate the net daily advantage of the system. (Do not round intermediate calculations.)
First National Bank requires a minimum balance of $1000 on its interest-earning checking accounts. Account holders are paid 1.50 percent on the average balance if the balance stays above the minimum all month. If you normally have an average balance of $2200, what is the annual opportunity cost of keeping the money in a First National checking account instead of a savings account that pays 3.50 percent? $44.00 $24.00 $33.00 $42.00
PLEASE MAKE IT IN EXCEL AND SHOW THE FORMULAS (Take screenshots) La Resolana, S.A., has credit sales of $180,000 per year, with net payment terms of 30 days, which is also the average collection period. La Resolana does not currently offer any cash discounts, so customers take the 30 days to pay. What is the average accounts receivable balance? What is the accounts receivable turnover?