Effective annual interest rate on this line of credit

Assignment Help Financial Management
Reference no: EM13805947

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:

1) Pay 2.1 percent per quarter on any funds actually borrowed.

2) Maintain a 4 percent compensating balance on any funds actually borrowed.

3) Pay an up-front commitment fee of .150 percent of the amount of the line? Based on this information, answer the following:

a) Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?

 

b) Suppose your firm immediately uses $130 million of the line and pays it off in one year. What is the effective annual interest rate on this $130 million loan?

Reference no: EM13805947

Questions Cloud

Non-financial information should accountants disclose : The numbers don't tell the whole story. Accountants use notes to the financial statements to provide additional information and clarification. What types of non-financial information should accountants disclose? Some people argue that you can never i..
Gui and multithreading : If you need help with completing discussions please click here for more information. Describe one (1) way in which a GUI can take advantage of multiple threads. Provide one (1) example of such advantages to support your response
Experiencing diminishing marginal utility factors : The price of a hamburger is $1, the price of a movie is $6, and the consumer has $15. What is the consumer's optimum?
Write an essay about is romance a natural feeling : Write an essay about is romance a natural feeling.
Effective annual interest rate on this line of credit : Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? Suppose your firm immediately uses $130 million of the line and pays it off in one year. What is the effective annual interest rate on this $130 million l..
A struggling company has a positive cash flow : A struggling company has a positive cash flow, the cash flow is minimal. If something does not change soon, the company will go under. The product development team has just created a new product that will not only save the company from financial demi..
Which general social institution are you interested and why : Which general social institution are you interested and why
Event-driven programming or command line programming : Imagine that you have a choice between using event-driven programming or command line programming to develop a computer program. Determine one (1) advantage and (1) disadvantage of using each. Select the style of programming that you prefer, and j..
What is the expected return of a portfolio : Suppose Autodesk stock has a beta of 2.16, whereas Costco stock has a beta of 0.69. If the risk-free interest rate is 4% and the expected return of the market portfolio is 10%, what is the expected return of a portfolio that consists of 60% Autodesk ..

Reviews

Write a Review

Financial Management Questions & Answers

  What is the yield to maturity fir these bonds

Moon inc plans to issue new bonds but is uncertain how the market would set the yield to maturity. The bonds would be 20 year to maturity, carry 9.56 percent annual coupon, and have a $1000 pay value. Moon inc has determined that these bonds would se..

  Wbs could help the team in estimating financial services

Explain how your specific WBS could help the team in estimating, planning, and understanding project requirements, deliverables, and efforts required to meet the financial services legacy system migration.

  What risk-adjusted discount rate will equate NPV of Project

The Unlimited, a national retailing chain, is considering an investment in one of two mutually exclusive projects. The discount rate used for Project A is 12 percent. Further, Project A costs $15,000, and it would be depreciated using MACRS. What ris..

  Occurs at the financial break-even point

Which one of these occurs at the financial break-even point?

  Statement of cash flows is the last of four financial

The statement of cash flows is the last of the four financial statements we discussed. Explain why this statement is important to investors and how it complements the income statement and balance sheet. You should be able to answer this question in s..

  What rate of inflation is expected in year three and beyond

Economists expect the inflation rate to be 1.5 percent for the coming year and the following year, and then after Year 2 inflation will settle at a constant rate greater than 1.5 percent. The yield is the same on one-year bonds and two-year bonds; th..

  Expected return on the market

Security I has a beta of 1.3, the risk-free rate is 4%, and the expected return on the market is 11%. What is the expected return for Security I?

  Assess the financial value of the acquisitions and

assignment amazon.com business combinations and financial results analysis1.examine how at least three 3 growth

  What is the value of conroys unlevered operations

Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its beta is 1.30. Conroy has been barely profitable, so it has paid an average of only 20% in taxes during the last several ..

  After-tax cash flows

Find the PI. Cost of capital is 10.2%. The initial outlay is $256, 900. The following after-tax cash flows:

  Capital budgeting techniques discussed

Of the capital budgeting techniques discussed, which works equally well with normal and non-normal cash flows and with independent and mutually exclusive project?

  Discuss the effect of this on a defined benefit pension plan

During a certain year, interest rates fall by 200 basis points (2%) and equity prices are flat. Discuss the effect of this on a defined benefit pension plan that is 60% invested in equities and 40% invested in bonds.

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