Loan origination fee and compensating balance requirement

Assignment Help Financial Management
Reference no: EM131188253

You are considering borrowing 1 million SEK for one month at an APR of 12%. The bank will require a (no-interest) compensating balance of 2% of the face value of the loan and will charge a 4000 SEK loan origination fee.

(a) Which total amount you must borrow to cover both the loan origination fee and the compensating balance requirement?

The total amount is.............. (round to SEK, no decimals)

(b) What is the interest expense (including the origination fee) for the one-month loan?

The interest expense is SEK. (round to SEK, no decimals)

(c) What is the effective annual rate (EAR)? The EAR is %. (round to two decimals)

Reference no: EM131188253

Questions Cloud

What is current value of this stock if the required return : General Importers announced today that its next annual dividend will be $2.60 per share. After that dividend is paid, the company expects to encounter some financial difficulties and is going to suspend dividends for five years. Following the suspens..
Considering purchasing some new equipment costing : Delta Mu Delta is considering purchasing some new equipment costing $400,000. The equipment will be depreciated on a straight-line basis to a zero book value over the four-year life of the project. Projected net income for the four years is $18,900, ..
What is the value of project with average risk : Suppose? Alcatel-Lucent has an equity cost of capital of 10.4 % ?, market capitalization of $ 10.22 ?billion, and an enterprise value of $ 14.0 billion with a debt cost of capital of 5.9 % and its marginal tax rate is 34 % . What is? Alcatel-Lucent's..
Compute the yield to maturity on the old issue : Airborne Airlines Inc. has a $1,000 par value bond outstanding with 30 years to maturity. The bond carries an annual interest payment of $108 and is currently selling for $940. Airborne is in a 30 percent tax bracket. Compute the yield to maturity on..
Loan origination fee and compensating balance requirement : You are considering borrowing 1 million SEK for one month at an APR of 12%. The bank will require a (no-interest) compensating balance of 2% of the face value of the loan and will charge a 4000 SEK loan origination fee. Which total amount you must bo..
All cash flows generated by the real estate : Assume that the price of real estate is determined by P=PV(all cash flows generated by the real estate). After you have graduated you work for some years and can save some money. If discount rate is 1% lower than 3.5% what is the price of the house? ..
Zero-coupon bond with a yield to maturity : Suppose you purchase a 30-year, SEK 10,000 par value, zero-coupon bond with a yield to maturity (YTM) of 4.4%. You hold the bond for 5 years before selling it. What is the price of the bond when you buy it? If the bond’s yield to maturity increases b..
The incremental free cash flow : Two years ago the Krusty Krab Restaurant purchased a grill for $50,000. The owner, Eugene Krabs, has learned that a new grill is available that will cook Krabby Patties twice as fast as the existing grill. The incremental free cash flow that the Krus..
Annual amount needed during retirement : Jose, age 25, currently saves $7000 per year in his retirement account which is expected to earn 5% return. Jose is planning to retire at 62 and needs to fund his retirement upto age, 85. He has estimated that the annual amount needed during retireme..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Immunization is the process

Immunization is the process of ________ to ensure an outcome.

  Consider the two mutually exclusive projects

Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 346,000 –$ 48,000 1 49,000 24,400 2 69,000 22,400 3 69,000 19,900 4 444,000 15,000 Which ever project you choose, if any, you require a 16 percent return on..

  Equilibrium price and interest rate of the bond according

If a corporation begins to suffer large losses, then the default risk on the corporate bond will increase. Illustrate graphically how this event affects the demand or supply what happens to equilibrium price and interest rate of the bond according.

  Future value-make single investment

(Future Value) Sarah Wiggum would like to make a single investment and have $2 million at the time of her retirement in 35 years. She has found a mutual fund that will earn 4 percent annually. How much will Sarah have to invest today? What if Sarah w..

  Calculate patient revenue on accrual basis

Calculate patient revenue on accrual basis for the coming year. Subdivide revenue by program, and within each program subdivide it by type of payer.

  What is the amount of the nest egg needed

Your uncle wants to retire in 20 years and expects his retirement to last 25 years. He wants to take out (i.e., withdraw) $2,500 at the end of every month over those 25 years. Assume that he can earn 6% per year on his investments. First, what is the..

  What is the dollar amount of dividends-owning the stock

Lee purchased a stock one year ago for $27. The stock is now worth $30, and the total return to Lee for owning the stock was 0.40. What is the dollar amount of dividends that he received for owning the stock during the year?

  What actions would the fed take if inflation is too high

What action(s) would the Fed take if inflation is too high? What would it do if the unemployment rate is too high? What would it do if both inflation and unemployment rates are too high?

  Difference between forward contract price and future price

A futures contract expiring in April on Mexican pesos is available now for $.08 per unit. Also, a forward contracts is available for the same settlement date at a price of $.085 per peso. How could speculators capitalize on this situation, assuming z..

  Unlevered beta-what is the beta of debt

El Paso Inc. has an unlevered beta equal to 0.7 and an equity beta equal to 1.4. The Debt-to-Value ratio is 70% and the corporate tax rate is 15%. What is the beta of debt? show your working

  Compute the incremental income after taxes

Johnson Electronics is considering extending trade credit to some customers previously considered poor risks. Sales would increase by $130,000 if credit is extended to these new customers.  Compute the incremental income after taxes.  What will John..

  What is the value of the warrants

Gregg Company recently issued two types of bonds. The first issue consisted of 20-year straight (no warrants attached) bonds with an 8% annual coupon. The second issue consisted of 20-year bonds with a 6% annual coupon with warrants attached. Both bo..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd