Handley Bank advertises that its standard lending rate is 12% per annum compounding monthly. Which of the following rates represent effective rates that are consistent with the Handley Bank quoted rate (to two decimal places)? Group of answer choices A) 12.68% per annum compounding annually B) None of the other options are correct C) More than one of the other options are correct D) 3.00 % per quarter compounding quarterly E) 1.00 % per month compounding monthly

Handley Bank advertises that its standard lending rate is 12% per annum compounding monthly. Which of the following rates represent effective rates that are consistent with the Handley Bank quoted rate (to two decimal places)? Group of answer choices A) 12.68% per annum compounding annually B) None of the other options are correct C) More than one of the other options are correct D) 3.00 % per quarter compounding quarterly E) 1.00 % per month compounding monthly

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Handley Bank advertises that its standard lending rate is 12% per annum compounding quarterly. Which of the following rates represent effective rates that are consistent with the Handley Bank quoted rate (to two decimal places)? Group of answer choices A. More than one of the other options are correct B. 12.68% per annum compounding annually C. None of the other options are correct D. 3.00 % per quarter compounding quarterly E. 1.00 % per month compounding monthly
Come and Go Bank offers your firm a discount Interest loan with an interest rate of 10 percent for up to $26 million, and in addition requires you to maintain a 2 percent compensating balance against the face amount borrowed. What is the effective annual interest rate on this lending arrangement? (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.32.16.)
Van Buren Resources Inc. is considering borrowing $90,000 for 175 days from its bank. Van Buren will pay $3,000 of interest at maturity, and it will repay the $90,000 of principal at maturity. Assume that there are 365 days per year. Calculate the loan’s annual financing cost. Round your answer to two decimal places. % Calculate the loan’s annual percentage rate. Round your answer to two decimal places. % What is the reason for the difference in your answers to Parts a and b? The does not consider compounding effects.
A certain bank is offering a special deal where it will pay 7.56% interest compounded daily (assume 365 days per year). What is the effective annual rate the bank is offering? (Please enter your answer as a whole number to two decimal places. i.e. 2.25, not 0.0225)
Many lending agencies compound interest more often than yearly, and as we noted in Example P.2, they are required to report the annual percentage rate, or APR, in a prominent place on the loan agreement. Furthermore, they are required to calculate the APR in a specific way. If r is the monthly interest rate, then the APR is calculated using APR = 12 ✕ r. (a) Suppose a credit card company charges a monthly interest rate of 1.8%. What APR must the company report? (Round your answer to the nearest tenth of a percent.) %(b) The phrase annual percentage rate leads some to believe that if you borrow $5000 from a credit card company which quotes an APR of 21.6%, and if no payments are made, then at the end of 1 year interest would be calculated at 21.6% simple interest on $5000. How much would you owe at the end of a year if interest is calculated in this way? (Round your answer to the nearest cent.)$ (c) If interest is compounded monthly (which is common), then the actual amount you would…
Honesty Company is exploring to issue a financial instrument next year. They are researching for a reasonable interest rate to offer. The financial instrument is expected to cover for 180 days. Government Treasury Bills are being offered with the following rates: 30 day – 1.5%; 60 day – 2%; 90 day – 2%; 180 day – 2.50%; and 360 day – 3%. Inflation was reported at 1.2%. Honesty must be able to safeguard at least 3% of the risk for this issuance.What is the appropriate interest rate (round off your answer to two decimal places)?
A KIMEP BANK quotes you and interest rate of 12,5% per annum with semiannual compounding. What is the equivalent rate with annual compounding and continuous compounding? Choose the right answer: a. The rate with annual compounding is 12.89% and the rate with continuous compounding is 12.12% b. The rate with annual compounding is 12.12% and the rate with continuous compounding is 9.57% c. The rate with annual compounding is 10.28% and the rate with continuous compounding is 12.89% d. The rate with annual compounding is 10.38% and the rate with continuous compounding is 12.12%
Bank of America quotes a rate of 11.5% with monthly compounding for a consumer loan, while Wells Fargo quotes you 12% with annual compounding.a. What is the EAR for Bank of America? b.
goblets Ltd is expanding in 2021 and would like to obtain a lon from a bank in order to finance its growth. Financial manager has been presented with the following options from two different banks, but she is unsure which of the loans choose: Bank DEF - interest on the loan at 10.5%, compounded quarterly bank RST - interest on the loan at 10.8%, compounded monthly Q.5.1 calculate the effective Annual Rate (EAR) llfor each loan. Round to two decimals Q.5.2 Advise the financial manager of Goblers Ltd on which bank she should choose. Support your choice with reasoning Q.5.3 The financial manager obtains a quote from a third bank, bank TMN, for interest on the loan at 10.5%, compounded bi-annually without calculating the effective annual rate (EAR for the loan from bank TMN, would you expect the EAR to be higher or lower than the EAR for the loan from Bank DEF? Motivate your answer with reasoning
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 equivalent
Please answer and provide solutions for three questions. 1. Given i(26) = 3.150%, find the equivalent nominal interest rate compounded quarterly. 2. Given an effective quarterly rate of 2.22500%, find the equivalent effective semi-annual rate. (You might need to keep more than the usual number of decimal places!) 3. Given an effective quarterly rate of 1.25000%, find the equivalent nominal rate i(2).
Tokyo Corporation must pay its supplier P500,000. Tokyo Corp's bank has advertised a 270-day loan with simple interest at a rate of 12 percent. On business loans, the bank requires a 20 percent compensating balance. What is the loan's effective annual rate (rEAR) if Tokyo Corporation currently holds no funds with the lending bank? In your calculations, assume that a year has 360 days. a. 12.00% b. 11.35% c. 15.00% d. 11.25% e. 15.27%