The financial managers at Hansborough Corporation are arranging the financing for working capital requirements for...
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Finance
The financial managers at Hansborough Corporation are arranging the financing for working capital requirements for the upcoming year. Hansboroughs local bank offers a discount interest loan at a quoted (simple) interest rate of 12.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Hansborough applies for a $200,000 loan with a nine-month term.
Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan.
|
| Value |
|---|---|
| Interest payment | |
| Amount of cash received | |
| Annual percentage rate (APR) | |
| Effective annual rate (EAR) |
What is the nine-month rate if the bank charges a $100 processing fee?
a.) 9.05%
b.) 8.96%
c.) 13.19%
d.) 9.95%
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