PayDay Loans is offering a special on one- year loans. The company will loan you $5, 000 today in exchange for one payment of $5, 900 one year from now. What is the APR on this loan? (a) 10.63 percent (b) 11.20 percent (c) 11.63 percent (d) 17.93 percent (e) 18.00 percent

PayDay Loans is offering a special on one- year loans. The company will loan you $5, 000 today in exchange for one payment of $5, 900 one year from now. What is the APR on this loan? (a) 10.63 percent (b) 11.20 percent (c) 11.63 percent (d) 17.93 percent (e) 18.00 percent

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Q: Pursell Bank offers you a five-year loan for $100,000 at an annual interest rate of 6.8 percent.…

A: Here, Loan Amount is $100,000 Interest Rate is 6.8% Loan Period is 5 years Compounding Period is…

Q: You have approached your bank for a 30 year mortage loan in the sum of $2,160,000. The bank has…

A: Monthly payments refers to the periodic payment of repayment of a loan. Monthly payments includes…

Q: Banks sometimes quote interest rates in the form of “add-on interest.” In this case, if a 1-year…

A: Loan Amount borrowed= $1,000 Monthly payment = $108 Time period = 12 months

Q: Southwestern Bank offers to lend you $55,000 at a nominal rate of 6.40%, compounded monthly. The…

A: The real interest that an investor earns on the investment and a borrower pays on loan after…

Q: A local finance company quotes a 14 percent interest rate on one-year loans. So, if you borrow…

A: The annual percentage rate is the rate that represents the interest rate for a whole year instead of…

Q: Straight bank loan. Right Bank offers EAR loans of 9.07% and requires a monthly payment on all…

A: Using excel PMT function to calculate monthly payment

Q: How much higher or lower is the effective annual rate charged by Midwest versus the rate charged by…

A: Effective Annual Interest Rate: It is the interest rate adjusted over a period for the effects of…

Q: Straight bank loan. Right Bank offers EAR loans of 9.44% and requires a monthly payment on all…

A: The amount of loan repayment which is required to be paid on a monthly basis is known as monthly…

Q: ABC Company enters into an IRG arrangement with Ch-bank for a 9 months, P800,000 loan starting 3…

A: Loan is a value which is borrowed from other sources like banks for the period and this amount is…

Q: You borrowed $25,000 from a bank at an interest rate of 12%, compoundedmonthly. This loan will be…

A: Single payment of the loan amount after certain payments of installment is the present worth of the…

Q: Straight bank loan. Right Bank offers EAR loans of 8.74% and requires a monthly payment on all…

A: Monthly payment formula: PMT = principal ×aprm1-1+aprm-m×n where, m = frequency of compounding n =…

Q: Garantea Company enters into an IRG arrangement with Metrobank for 9 months, P800,000 loan starting…

A: Loan is a value which is borrowed from other sources like banks for the period and this amount is…

Q: A recent graduate's student loans total $17,000. If these loans are at 4.2%, compounded quarterly,…

A: using financial calculator, N = 8*4 =32 I/Y = 4.2%/4 = 1.05% PV = -17,000

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: KBL Bank Limited quotes a 21 percent interest rate on one-year loans. So, if you borrow $75,000, the…

A: Given information: KBL bank Limited quoted 21% interest one year loans. But payments are deducted…

Q: Straight bank loan. Right Bank offers EAR loans of 8.74% and requires a monthly payment on all…

A: APR is termed as the Annual Percentage Rate which is charged by any of the authorizing institutions…

Q: Suppose you take out a loan of amount L with monthly interest payments, and monthly deposits into…

A: Sinking Fund payment refers to the amount which is deposited in an account generating guaranteed…

Q: A student has a total of $3,000.00 in student loans that will be paid with a 48-month installment…

A: A loan is a sort of debt that is taken on by an individual or another institution. The lender, which…

Q: Quick Loans will loan you $500 with the understanding that you will repay them $598 in two weeks.…

A: Given that: Principal amount = $500 Interest amount = Future Amount - Principal = 598 - 500 = $98

Q: Arman will pay back a P450,000 loan at the end of 26 months. This loan has an annual simple discount…

A: The loan is a value that is borrowed from external sources like banks and this amount is repaid…

Q: Leroy Inc. signed a 3 year loan for $80,000 with interest rate of 10%. What are the three annual…

A: Introduction: Interest amount = Interest is calculated on Principal amount. Formula = Principal…

Q: The First National Bank is offering a 3 year certificate of deposit (CD) at 4% interest compounded…

A: Here, First National Bank Second National Bank Investment $7,000 $7,000 Interest Rate (r)…

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

A: Effective Annual interest rate(EAR) refers to the actual interest rate which is received on deposits…

Q: You plan to apply for a loan from Bank of Kuala Lumpur. The nominal annual interest rate for this…

A: The EAR is the actual rate of return earned over a period after taking the compounding periods into…

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: Cerise Company would record a note payable of_____, if the terms of the loan with a bank are as…

A: Present value (PV) of an future amount is equal amount of such at present, discounted at a…

Q: SunBlush Technologies takes out a $16,000 loan that charges 5.25% interest compounded semi-annually…

A: Loan and its repayments: A loan taken out can be repaid in equal periodic instalments over the loan…

Q: What effective annual rate (EAR) are they charging us on the loan?

A: Effective Annual Rate: It refers to the true annual rate on a loan/credit or on investment since it…

Q: A local finance company quotes a 12 percent interest rate on one-year loans. So, if you borrow…

A: The legally quoted rate represents the true cost of borrowing the loan. Effective Annual Rate is the…

Q: What is the present value of $700 to be received in two equal installments ($350 each), two years…

A: Hello. Since your question has multiple parts, we will solve first question for you. If you want…

Q: LOA Bank Limited quotes a 9 percent interest rate on loans for 1 year. You are seeking a loan of…

A: Given data: loan amount = $50,000 Repayment amount = $54,500 Number of payments =12 monthly payment…

Q: A local finance company quotes an interest rate of 16.7 percent on one-year loans. So, if you borrow…

A: Given Loan amount = $25000 Interest = $4175pa Number of months = 12 months PMT = $2,431.25…

Q: ABC bank loans $250,000 to Yossarian to purchase a new home. Yossarian will repay the note in equal…

A: Given the following information: Loan amount: $250,000 Number of years: 30 years Rate of interest:…

Q: Toyota S murang auto finance company is prepared to offer you a loan of $38,000 to buy a new Toyota…

A: Loan amount (L) = $38000 n = 7 years r = 12% Let A = Annual repayment

Q: Starr Co, has been approved for a $ 100,000 loan commitment from its local bank. The bank has…

A: Loan commitment= $100,000 Term = 1 year Up front fee =75 basis point=0.75% Back end fee =25 basis…

Q: Prescott Bank offers you a five-year loan for $62,000 at an annual interest rate of 6.25 percent.…

A: Using excel PMT function

Q: Discount loan. Up-Front Bank uses discount loans for all its customers who want one-year loans.…

A: Interest on discount rate = 8.5% Repayment Amount = $225,000 The initial amount will be equal to…

Q: Bank JPX is offering personal loans of $35,000 to be repaid over 6 years with payments of $625 per…

A: Here, To Find: Effective annual rate (EAR) =?

Q: ABC Bank offers to lend you $50,000 for one year at a quoted annual rate of 8.46% with each payment…

A: Banks generate most of their income from the interest that is earned from the loans. These loans are…

Q: Sheridan Service has a line of credit loan with the bank. The initial loan balance was $6000.00.…

Q: Dinero Bank offers you a $39,000, 8-year term loan at 7 percent annual interest. Required: What will…

A: Annual loan payment = (Loan amount x r)/[1 - (1 + r)-n]

Q: The Sandhill Bar & Grill has a seven-year loan of $29,800 with Bank of America. It plans to repay…

A: The question gives the following information:

Q: annual loan payment

A: Annual Loan Payment: Annual loan payment is the amount to be paid in a year on the loan taken.…

Q: A mortgage company offers to lend you $85,000; the loan calls for payments of $8,273.59 per year for…

A: Given details are : Present value of Loan (PV) = $85000 Future value of loan (FV) = 0 Yearly payment…

Q: Straight bank loan. Right Bank offers EAR loans of 8.65% and requires a monthly payment on all…

A: APR is an abbreviation for Annual Percentage rate which refers to the interest rate or finance rate…

Q: You are about to borrow $25,000 from a bank at an interest rate of 10% compounded annually. You are…

A: The schedule that shows the nominal amount of principal and interest that is paid in amortizing loan…

Q: A loan is to be repaid by $1500 in one year and $2250 in four years. The borrower has asked to repay…

A: Outstanding loan amount is $1500 (due in 1 year) and $2250 (due in 4 years). Present value and…

Question

PayDay Loans is offering a special on one-
year loans. The company will loan you
$5, 000 today in exchange for one payment
of $5, 900 one year from now. What is the
APR on this loan?
(a) 10.63 percent
(b) 11.20 percent
(c) 11.63 percent
(d) 17.93 percent
(e) 18.00 percent

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: Introduction to Question:

VIEW

Step 2: Calculation of Annual Percentage Rate :

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, finance and related others by exploring similar questions and additional content below.

Similar questions

If Bergen Air Systems takes out a $100,000 loan, with eight equal principal payments due over the next eight years, how much will be accounted for as a current portion of a noncurrent note payable each year?
Calculating and comparing add-on and simple interest loans. Eli Nelson is borrowing 10,000 for five years at 7 percent. Payments, which are made on a monthly basis, are determined using the add-on method. a. How much total interest will Eli pay on the loan if it is held for the full five-year term? b. What are Elis monthly payments? c. How much higher are the monthly payments under the add-on method than under the simple interest method?
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
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
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?
Cost of Bank Loan Mary Jones recently obtained an equipment loan from a local bank. The loan is for 15,000 with a nominal interest rate of 11%. However, this is an installment loan, so the bank also charges add-on interest. Mary must make monthly payments on the loan, and the loan is to be repaid in 1 year. What is the effective annual rate on the loan (assuming a 365-day year)?
Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?
ExerciseInstallment Notes ABC bank loans $250,000 to Yossarian to purchase a new home. Yossarian will repay the note in equal monthly payments over a period of 30 years. The interest rate is 12%. Required: If the monthly payment is $2,571.53, how much of the first payment is interest expense and how much is principal repayment? (Note: Round to the nearest cent.)
Calculating single-payment loan amount due at maturity. Stanley Price plans to borrow 8,000 for five years. The loan will be repaid with a single payment after five years, and the interest on the loan will be computed using the simple interest method at an annual rate of 6 percent. How much will Stanley have to pay in five years? How much will he have to pay at maturity if hes required to make annual interest payments at the end of each year?