Jasper, Inc. is looking for a five-year term loan of $3 million. The firm will have to pay a premium of 1.5 percent for default risk to its bank and another 0.75 percent for maturity risk. The current prime rate is 7.5 percent. What is the loan rate on this bank loan? 9% 8.25% 9.75% None of the above
Jasper, Inc. is looking for a five-year term loan of $3 million. The firm will have to pay a premium of 1.5 percent for default risk to its bank and another 0.75 percent for maturity risk. The current prime rate is 7.5 percent. What is the loan rate on this bank loan? 9% 8.25% 9.75% None of the above
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 14P
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Jasper, Inc. is looking for a five-year term loan of $3 million. The firm will have to pay a premium of 1.5 percent for default risk to its bank and another 0.75 percent for maturity risk. The current prime rate is 7.5 percent. What is the loan rate on this bank loan?
9%
8.25%
9.75%
None of the above
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