Navy Bank requires borrowers to keep a 13 percent compensating balance. Gorman Jewels borrow $380,000 at a 6 percent stated APR. What is the effective interest rate on the loan? (Round answer to 2 decimal places, e.g. 12.25%.) Effective interest rate ________ %

Navy Bank requires borrowers to keep a 13 percent compensating balance. Gorman Jewels borrow $380,000 at a 6 percent stated APR. What is the effective interest rate on the loan? (Round answer to 2 decimal places, e.g. 12.25%.) Effective interest rate ________ %

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 18P

See similar textbooks

Related questions

Q: Kylah Enterprises signs a 3-month, noninterest-bearing note with a stated rate of 13.5% and a…

A: Given, Principal =$215,000 Interest =13.5% Computation of interest =$215,000 * 13.5% *3/12…

Q: Daisy's LLC borrowed $2.40 million at an APR of 9.0 percent. The loan called for a compensating…

A: Loan amount (L) = $2.40 million Interest rate (r) = 9% Compensating balance (C) = 18% of L = 0.432…

Q: The First Bank of Lending lists the following APR for loans. Determine the APY, or effective…

A: The conceptual formula used:

Q: XXX, Inc. finances tis seasonal working capital need with short-term bank loans. Management plans to…

A: Calculating the interest payment on the working capital loan. We have,Loan Amount = $ 65,000Interest…

Q: Brothers Corporation borrows P70,000.00, annual interest rate of 19% is deducted in advance. What is…

A: Gross borrowing = P 70,000 Interest advance deduction = 19%

Q: The following questions are not related. Requirements Duncan Brooks needs to borrow $500,000 to…

A: 1.Determine the amount of money Company D will receive under this arrangement, the amount to payback…

Q: Paul and Sandy Moede signed an $7,200 note at Citizen's Bank. Citizen's charges a 2.5% discount…

A: Given data, Face value of Note = $7,200 Bank discount rate = 2.5% Loan is for 320 days Number of…

Q: Find the annual financing cost (AFC) or a 30 day line of credit where the bank requires a 10%…

A: *Answer: Data given: Loan amount =$214,296 Interest rate…

Q: State Federal Bank (SFB) offers two borrowing options to businesses: (1) a simple interest loan with…

A: The effective annual rate refers to the rate of return that is arisen from the investment after…

Q: NOP Co. has agreed to the following loan proposal by a bank: ▪ Stated interest rate of 10% on a…

A: Net proceeds refers to the left out amount after considering all expenses likes commission expenses,…

Q: Stephens Metals Company has a revolving credit agreement with its bank permitting it to borrow up to…

A: With the given information, we can determine the annual finance cost of borrowing $20 million under…

Q: Good Deal Bank offers your firm a discount interest loan at 7.75% for up to $25 million and, in…

A: Amount of Loan = $25 million Interest rate = 7.75% Compensatory Balance = 5%

Q: Come and Go Bank offers your firm a discount Interest loan with an interest rate of 10 percent for…

A: Effective annual interest rate(ear) is the actual rate of return that is earned/ paid on loan…

Q: A print shop borrows $2900 from a credit union for 231 days. The credit union charges simple…

A: Borrowed amount = $2,900 Time Period = 231 Days Interest Rate = 8.25%

Q: Pendragon Inc. has an operating loan with a balance of $52,000 on September 1 with interest set at…

A: The answer is stated below:

Q: A firm sells its accounts receivables to a factor at a 3.5% discount. The average collection period…

A: Average collection period = 3 months Discount = 3.5% Receivables Turnover = 12months / Average…

Q: Anderson Co. issued a $55,000, 60-day, discounted note to National Bank. The discount rate is 6%. At…

A: In the above case, the borrower must pay the par value at the maturity which is $55,000. The…

Q: Bank of Vancouver pays 7 percent simple interest on its savings account balances, whereas Bank of…

A: Simple interest is an ordinary interest payble at equal amount over specified period over principal…

Q: Summit Record Company is negotiating with two banks for a $127,000 loan. Fidelity Bank requires a…

A: Here, Details of Fidelity Bank: Loan Amount is $127,000 Compensating Balance is 22% Number of…

Q: Cook Security Systems has a $37,500 line of credit, which charges an annual percentage rate of prime…

A: Given, Cock security system has $37500 line of credit Annual percentage rate = 4% october pmt -…

Q: On January 1, 20x1, Next Co. obtains a P4,000,000 bank loan due on December 31, 20x4. Interest of…

Q: NTA Co. needs to borrow P300,000 for the next 6 months. The company has a line of credit with a bank…

A: Borrowing is a common occurrence in adulthood. At some point in their lives, almost everyone will…

Q: Uptown Bank has granted a line of credit of $80,000 with an interest rate of 7.5 percent and a…

A: Given information: Line of credit amount is $80,000 Interest rate is 7.5% Compensating balance…

Q: Jhar Industries has borrowed $125,000 under a line-of-credit agreement. While the company normally…

A: Borrowed Amount is $125,000 Amount to be maintained in lenders account is $15,000 Compensating…

Q: A bank sets the loan rate on a prospective loan at 14%. This consists of a 12% base rate and a 2%…

A: A loan is a financial aid which is given by one party to another party. This transaction can take…

Q: mobile Co issued a $58,904 60-day discounted note to Guaranty Bank the discount rate is 12% at…

A: Cash proceeds from issue of discount note = Amount of the note - discount = $58,904 -…

Q: 12. Tony's Towing borrows $17,250, at 7.5% interest, for 320 days. If the bank uses the exact…

A: Solution:- When an amount is borrowed from bank, bank charges interest on it. In exact interest…

Q: New Town Bank offers you a line of credit of $50,000 with an interest rate of 2.1 percent per…

A: An investor invests in specific securities in order to get some returns, the actual rate of return…

Q: Mike Drago took out a for $3,900 at the Gold Coast Bank for 270 days. If the bank uses the ordinary…

A: Rate of Interest = Amount of Interest / (Principal * time)

Q: Alana Olsen borrowed $5,000 for 90 days from First Bank. The bankdiscounted the note at 7 percent.a.…

A: Borrowed amount=$5000Discount rate=7%Time period=90days

Q: Canliss Mining Company borrowed money from a local bank. The note the company signed requires five…

A: Given the certain rate of return, present value (PV) is the current value of a future sum of money…

Q: Nelson Co. issued a $80,000, 90-day, discounted note to Community Bank. The discount rate is 5%. At…

A: Solution: As note is already a discounted note, therefore at maturity borrower will pay face amount…

Q: Tokyo Corporation must pay one of its suppliers P765,000. The bank requires a 15 percent…

A: Banks and financial organizations often lend money to various businesses, clients, and investors in…

Q: Paul and Sandy Moede signed an $7,500 note at Citizen’s Bank. Citizen’s charges a 5.4% discount…

A: a) Bank discount on the loan or maturity value of $7,500 with a rate of 5.4% and time of 270 days is…

Q: Maximum Bank has analyzed the accounts receivable of Scientific Software, Inc. The bank has chosen…

A: In this question, we have to find out the maximum amount that the bank will lend In the next…

Q: Bank A offers loans at an 8% nominal rate (its APR) butrequires that interest be paid quarterly;…

A: Given, The APR of bank A is 8% and interest paid quarterly.

Q: National Company has a P25,0000 line of credit at a 9% interest rate. The loan agreement requires a…

A: Effective interest rate is the rate at which the funds are really made available. In other words, it…

Q: Mobile Co. issued a $59,421, 60-day, discounted note to Guarantee Bank. The discount rate is 11%. At…

A: Discounting: It is the process where the bill is given to a bank to get the bill discounted before…

Q: .A bank offers a 272- day discounted loan at a simple discount rate of 12%. (a) How much money would…

A: The discount on loan is given and that discount on loan is the interest being charged on the loan…

Q: Max Wholesaler borrowed $7,500 on a 8%, 120-day note. After 45 days, Max paid $2,625 on the note.…

A: Intoduction:- A borrower or deposit-taking financial institution pays interest to a lender or…

Q: Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate…

A: Calculation of Effective rate of interest EIR = Interest / usable fund x 12/12 = 33200 /…

Q: Elliott Credit Corp. wants to earn an effective annual return on its consumer loans of 14.2 percent…

A: given, EAR= 14.2%M = 365

Q: Hagar Company's bank requires a compensating balance of 10% on a $100,000 loan. If the stated…

A: Compensating balance: A compensating balance is a minimum amount of cash that must be maintained by…

Q: Maris Bank has analyzed the accounts receivable of Anthony Software, Inc. The bank has chosen eight…

A: Calculation of maximum amount lend and effective annual rate of anthony softwere are as follows.

Q: Calculate the effective interest rate for Fidelity Bank and Southwest Bank. Which loan should Summit…

A: Given, Loan Amount = $151,000 Fedility Bank = 28% SouthWest Bank = 14% Stated Rate for both Banks =…

Concept explainers

Calculating the Return On A Loan

Question

100%

Navy Bank requires borrowers to keep a 13 percent compensating balance. Gorman Jewels borrow $380,000 at a 6 percent stated APR. What is the effective interest rate on the loan? (Round answer to 2 decimal places, e.g. 12.25%.)

Effective interest rate

________ %

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an annual interest rate of 11%. If 6 months have passed since note establishment, what would be the recorded interest figure at that time? A. $7,150 B. $65,000 C. $14,300 D. $2,383
Marathon Peanuts converts a $130,000 account payable into a short-term note payable, with an annual interest rate of 6%, and payable in four months. How much interest will Marathon Peanuts owe at the end of four months? A. $2,600 B. $7,800 C. $137,800 D. $132,600
Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. a. The nominal annual rate on the loan was 11.25%. What is the true effective rate? b. What would be the effective cost of the loan if the note required discount interest? c. What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments?
Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Sub-Cinema Inc. borrowed $10,000 on Jan. 1 and will repay the loan with 12 equal payments made at the end of the month for 12 months. The interest rate is 12% annually. If the monthly payments are $888.49, what is the journal entry to record the cash received on Jan. 1 and the first payment made on Jan. 31?
Everglades Consultants takes out a loan in the amount of $375,000 on April 1. The terms of the loan include a repayment of principal in eight, equal installments, paid annually from the April 1 date. The annual interest rate on the loan is 5%, recognized on December 31. (Round answers to the nearest cent, if needed.) A. Compute the interest recognized as of December 31 in year 1. B. Compute the principal due in year 1.
Pickles R Us is a pickle farm located in the Northeast. The following transactions take place: A. On November 6, Pickles borrows $820,000 from a bank to cover the initial cost of expansion. Terms of the loan are payment due in six months from November 6, and annual interest rate of 3%. B. On December 12, Pickles borrows an additional $200,000 with payment due in three months from December 12, and an annual interest rate of 10%. C. Pickles pays its accounts in full on March 12, for the December 12 loan, and on May 6 for the November 6 loan. Record the journal entries to recognize the initial borrowings, and the two payments for Pickles.
A ski company takes out a $400,000 loan from a bank. The bank requires eight equal repayments of the loan principal, paid annually. Assume no interest is paid or accumulated on the loan until the final repayment. How much of the loan principal is considered a current portion of a noncurrent note payable in year 3? A. $50,000 B. $150,000 C. $100,000 D. $250,000
Campus Flights takes out a bank loan in the amount of $200,500 on March 1. The terms of the loan include a repayment of principal in ten equal installments, paid annually from March 1. The annual interest rate on the loan is 8%, recognized on December 31. (Round answers to the nearest whole dollar if needed.) A. Compute the interest recognized as of December 31 in year 1 rounded to the whole dollar. B. Compute the principal due in year 1.