Petir Bank has awarded Pelangi Berhad a loan of RM500,000. The interest rate was charged at a rate of 12 percent. The facility will be available for seven months. If the loan agreement requires a 15 percent compensating balance, compute the effective interest rate of the loan. Answer O 11.5 percent O 13.5 percent O 12 percent O 14.12 percent

Petir Bank has awarded Pelangi Berhad a loan of RM500,000. The interest rate was charged at a rate of 12 percent. The facility will be available for seven months. If the loan agreement requires a 15 percent compensating balance, compute the effective interest rate of the loan. Answer O 11.5 percent O 13.5 percent O 12 percent O 14.12 percent

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 4P: Gifts Galore Inc. borrowed 1.5 million from National City Bank. The loan was made at a simple annual...

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Define each of the following loan terms, and explain how they are related to one another: the prime rate, the rate on commercial paper, the simple interest rate on a bank loan calling for interest to be paid monthly, and the rate on an installment loan based on add-on interest. If the stated rate on each of these loans was 5%, would they all have equal, effective annual rates? Explain.
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?
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.)
8. Computing the cost of a simple interest loan Montross Inc. needs to raise $300,000 for a nine-month term. Montross’s bank has offered to lend Montross the money at a 12.00% simple interest rate. Montross will receive the $300,000 upon approval of the loan and will pay back the principal and interest at maturity. Suppose the terms of the loan require that Montross maintain a compensating balance equal to 20% of the loan balance, and Montross will have to borrow the compensating balance from the bank. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of the loan considering the compensating balance requirement. Value Interest payment Amount of cash borrowed Annual percentage rate (APR) Effective annual rate (EAR)
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Q. Assume a bank has sanctioned a loan commitment of Rs.200000 to one of its prime customers with a current rating of “A” at an annual interest rate of 12%. The loan commitment is for a period of one year. The bank will charge an upfront fee of .05% on the sanctioned loan amount. The bank expects the client to use 80% of the sanctioned amount on an average during the year. The bank has asked the customer to maintain a compensating balance of 15% of the sanctioned amount in an account which will earn an interest of 2% per annum for the customer. The bank will also charge a backend fee of .02% on the unused amount of loan. The current reserve requirements are 5%. Estimate the expected return for the bank from the loan commitment?
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38 . China Banking Corporation granted a loan to a borrower on January 1, 2020. The interest rate on the loan is 10% payable annually starting December 31, 2020. The loan matures in five years on December 31, 2025. The data related to the loan are: Principal amount 6,000,000 Direct origination cost 92,250 Origination fee received from borrower 525,000 Indirect origination cost 100,000 The effective rate on the loan after considering the direct origination cost and origination fee received is 12%. What is the carrying amount of loans receivable on December 31, 2021?
Q11 A debt of $15,000 with interest at 12% compounded monthly is repaid over 10 years by equal payments made at the end of every three months. a)the size of the periodic payments b)For the first payment period, how much interest is paid, how much of the principal is repaid, and what is the loan balance? how much interest is paid how much of the principal is repaid what is the loan balance c) For the second payment period, how much interest is paid, how much of the principal is repaid, and what is the loan balance? how much interest is paid how much of the principal is repaid what is the loan balance