Reference no: EM132544915

Question 1: Compute the cost of not taking the following trade discounts: (Use 365 days in a year. Round the intermediate calculations to 4 decimal places. Round the final answer to 2 decimal places.)

a. 2/10, net 40.

Cost of lost discount %

b. 2/15, net 30.

Cost of lost discount %

c. 2/10, net 45.

Cost of lost discount %

d. 3/10, net 180.

Cost of lost discount %

Question 2: The average price on 91-day Treasury bills at a recent Tuesday auction was 98.671 with maturity value 100.

Calculate the T-bill's annualized yield. (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Question 3: Your bank will lend you $2,000 for 45 days at a cost of $25 interest.

a. What is your annual rate of interest? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

b. What is your effective annual rate? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Question 4: Birthdaybook requires $125,000 to finish a project.

a. With a compensating balance requirement of 10%, how much will the firm need to borrow? (Round the final answer to 2 decimal places.)

b. Given your answer to part a and a stated interest rate of 7 percent on the total amount borrowed, what is the annual rate on the $125,000 actually being used? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Question 5: Morrisette Records' commercial paper is currently selling at 98.512 percent of maturity value; it matures in 75 days.

a. What annualized yield is it offering to investors? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)

b. What annual effective yield [with compounding affects] is it offering to investors? (Use 365 days in a year. Do not round intermediate calculations. Round the final answer to 2 decimal places.)