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- Company A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $12,245, and they can borrow the money from Bank B, which has offered to lend the firm $12,245 for 1 months at an APR of 13% (compounded). The loan has a 1.54% loan origination fee. What would be the cost for Company A if they decide to borrow from Bank B?ZLX is seeking a bank to place short-term deposits at a good rate. Bank A is offering 3.5% APR compounded daily, while Bank B is offering an effective annual rate of 3.54%. Which bank should ZLX select? A) Bank A B) Bank B C) ZLX is indifferent because the rates are equivalentCompany A is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $23345, and they can borrow the money from Bank A, which has offered to lend the firm $23345 for 2 month(s) at an APR (compounded) of 15%. The bank will require a (no-interest) compensating balance of 7% of the face value of the loan and will charge a $216 loan origination fee, which means Hand-to-Mouth must borrow even more than the $23345. Compute the EAR of the loan. Give typing answer with explanation and conclusion
- From the banker’s point of view, when the banker quotes a floating interest, in doingso, the banker is passing on the interest rate risk to the borrower.• What if the banker has to quote a fixed interest rate but his cost of funds are floating?In this case, the customer/borrower faces no risk but the banker does.• Example: As a Credit Officer bank you have agreed to provide a customer with a fixedrate, 3-month, RM 20 million loan 90 days from today. You had priced the loan at 12%annual interest rate.• The following quotes are available in the market.3-month KLIBOR = 9 %3-month KLIBOR futures = 90.0 (matures in 90 days) How would you protect yourself from a rise interest rates?When interest rates are low, some automobile dealers offer loans at 0% APR, as indicated in a 2016 advertisement by a prominent car dealership, offering zero percent financing or cash back deals on some models. Zero percent financing means the obvious thing—that no interest is being charged on the loan. So if we borrow $1,200 at 0% interest and pay it off over 12 months, our monthly payment will be $1,200/12 = $100. Suppose you are buying a new truck at a price of $28,000. You plan to finance your purchase with a loan you will repay over two years. The dealer offers two options: either dealer financing with 0% interest, or a $2,800 rebate on the purchase price. If you take the rebate, you will have to go to the local bank for a loan (of $25,200) at an APR of 6.5%. What would your monthly payment be if you used dealer financing? (Round your answer to the nearest cent.)Your firm sells for cash only, but it is thinking of offering credit, allowing customers 90 days to pay. Customers understand the time value of money, so they would all wait and pay on the 90th day. To carry these receivables, you would have to borrow funds from your bank at a nominal 7%, daily compounding based on a 360-day year. You want to increase your base prices by exactly enough to offset your bank interest cost. To the closest whole percentage point, by how much should you raise your product prices? Do not round intermediate calculations. Round your answer to the nearest whole number.
- A supplier will give Shark Unibase Company a discount of 2% if an invoice is paid 60 days before its due date. Suppose Shark wants to take advantage of this discount but needs to borrow the money. It plans to pay back the loan in 60 days. What is the highest annual simple interest rate at which Shark Unibase can borrow the money and still save by paying the invoice 60 days before its due date?ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6,750,000 with an average age of 27 days.With the cash discount, credit sales are forecasted to increase by 15%, collections within the discount period is 40% and the average age will be 22 days.The variable cost rate is 60% while the effective interest rate that ABC uses for forecasting is 8%. Using a 360-day year, how much is the net benefit or (cost) of the new policy?You have decided to buy a car with price tag of $30,000 but you are able to negotiate the price down to $28,000. You have $1,000 saved, so you need to borrow $27,000 in a 5-year loan from your bank (your bank offers lower rates than the auto-dealer) at a 3% APR (annual rate). How much will you owe to the bank after 2 years?
- They plan to use their $40,000 is savings to cover the closing costs the bank will charge them,which are 1% of the amount they borrow from the bank. The rest of the savings will be used as adown payment. For example, if they borrow $330,000 using $20,000 for a down payment, theclosing costs will be $3,300, which still leaves them some savings. Determine the largestamount they can use for a down payment and still pay the closing costs.National Co. needs to borrow P300,000 for the next 6 months. The company has a line of credit with a bank that allows the company to borrow funds with a 10% interest rate subject to a 20% of loan compensating balance. Currently, National Co. has no funds on deposit with the bank and will need the loan to cover the compensating balance as well as their other financing needs. How much will National Co. need to borrow?The Patel Company has several financial issues to solve. As the company’s Financial Analyst you have been asked to answer the following 2 questions: Their bank will lend them $100,000 for 90 days at a cost of $1,200 interest. What is the company’s effective annual rate? A major supplier has granted credit terms of 1/10 N120. Assuming the company can borrow any amount of money at the rate you have calculated above (in part 1), should the company take the discount? (Your answer must be supported with a calculation of the cost of not taking the discount – using either simple or effective annual rate)