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- n this economy, there are 10,000 borrowers. Each person borrows $100 for a 1 year loan. For the lender not to make a loss, the lender must set an interest rate such that they earn at least as much as their outside option of not lending to people from all borrowers that did not default in this economy. In this case, the outside option is the risk-free interest rate on a 1-year US Treasury securtiy. The 1-year USTS pays annual interest rate of i = 0.03. What is the minimum interest rate that the lender will charge to borrow money in this economyIn December 2022, the Fed raised interest rates to their highest levels in 15 years. This makes borrowing more expensive, but makes savings more valuable. After years of near-zero interest rates on savings accounts, many banks are offering savings rates of nearly 4%. This is a pretty good risk-free return. Suppose that you deposit $10672 into a savings account that earns 4%. If interest rates do not decrease and you you withdraw your money in 40 years, what is your minimum withdrawal? In other words, how much will you withdraw if interest rates stay at 4%?Acacia Bank expects the euro to depreciate against the dollar and plans to take a short position in euros and a long position in dollars. Assume the following1. Interest rate on borrowed euros is 5 percent annualized2. Interest rate on dollars loaned out is 6 percent annualized3. Spot rate is 0.90 per dollar4. Expected spot rate in ten days is 0.95 per dollar5. Acacia Bank can borrow 10 millionDescribe the steps Acacia should take to profit from shorting euros and going long on dollars, show your calculations.
- You are negotiating to make a 6-year loan of $40,000 to Breck Inc. To repay you, Breck has agreed to pay $5,000at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, plus a fixed but currentlyunspecified cash flow, “X”, at the end of each year from Year 4 through Year 6. Breck is essentially riskless, soyou are confident the payments will be made. You regard 8% as an appropriate rate of return on a low risk butilliquid 6-year loan. What cash flow must the investment provide at the end of each of the final 3 years to satisfyyour return requirement? (i.e. what is “X”?) I am having trouble getting the decimal number that you divide by 40,000-25110.50Suppose your firm is seeking a seven - year, amortizing $770,000 loan with annual payments, and your bank is offering you the choice between a loan of $817,000 with a compensating balance of $47,000 and a loan of $770,000 without a compensating balance. The interest rate on the $770,000 loan is 8.0 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it?Your firm needs to borrow $1.0 million for one year. The firm has no other short term borrowings and it's combined state and federal tax rate is 25%. Your banker offers several lending alternatives. Which one will you choose? Select one: A)6.50% simple interest with a 20.00% compensating balance b) . 8.25% simple interest c) . 7.00% simple interest with a 15.00% compensating balance d) . 8.25% discount interest
- ABC Corporation wishes to raise money by selling a 90-day promissory note in the short-term money markets. The note promises to pay the holder $17,000,000 at maturity. If yields on similar risk notes are currently 2.8% p.a., how much money will ABC Corporation receive for the note? If the purchaser of the note holds it until maturity, what is the total amount of interest they will earn? For the purchaser in 2), what will be the return on investment (ignoring taxes)? Need help answering all these please!For your loan, there are 180 payments remaining, the outstanding balance is $350,000, the mortgage rate is 7.50% and. Suppose rate drops and you can refinance your loan at 6.75% with the same term but the refinancing fee is $10,000. Should you refinance and if so, how much do you save each month if you refinance, round to nearest cents? If not then why not? Jack owns 2,000 shares of common stock in a firm with 100,000 total shares outstanding. The firm announces its plan to sell an additional 50,000 shares and offers pre-emptive rights offering. The company offers a $2 discount and the price before the offering is $25, how much does he pay when he exercises the pre-emptive rights?FINCORP has two debtors who each make a $10, 000 purchase. Debtor 1 pays their account in 10 days, while debtor 2 pays in 30 days. a) In simple terms, what nominal annual interest rate is debtor 2 incurring for the benefit of delaying payment? Note: base your answer on the following logic. If a borrower pays 3% for a 30-day loan, we could express the nominal annual rate as roughly 36.5% i.e 3% x 365/30 = 36.5% that payment is due within 30 days but debtors will receive a 5 percent discount if they pay within 14 days. I'm quite unsure if that 5% as it is a discount, is handy or the steps to calculate the nominal interest rate
- Suppose two firms want to borrow money from a bank for a period of 10 years. Firm A has excellent credit and can borrow at the prime rate, whereas Firm B's credit standing is prime rate plus 2 percent. The current prime rate is 5.75 percent, the 30-year Treasury bond yield is 4.35 percent, the three-month Treasury bill yield is 3.54 percent, and the 10-year Treasury note yield is 4.24 percent. What are the appropriate loan rates for both the firms? 6.45% for Firm A, 7.75% for Firm B 6.45% for Firm A, 8.45% for Firm B 5.75% for Firm A, 8.45% for Firm B None of the aboveYou want to buy a $170000 home. You plan to pay $34000 as a down payment, and take out a 20 year loan at 4.5% interest for the rest. After 14 years, you decide to pay off the entire loan.a) What is the amount of the payment? b) What is the outstanding principal after 14 years?c) If the bank charges 3.5 points on the loan, what is the amount charged for points?d) If the bank charges 3.5 points on the loan, what is the true interest rate?You want to buy a $280000 home. You plan to pay $56000 as a down payment, and take out a 15 year loan at 3.5% interest for the rest. a) What is the amount of the payment? b) If the bank charges 3 points on the loan, what is the amount charged for points? c) If the bank charges 3 points on the loan, what is the true interest rate?