What is the effective annual rate on loan with interest rate

Assignment Help Financial Management
Reference no: EM13811299

In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $24,000 and the interest rate is 21.75%, the borrower "pays" 0.2175 × $24,000 = $5,220 immediately, thereby receiving net funds of $18,780 and repaying $24,000 in a year. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 21.75%?

Reference no: EM13811299

Questions Cloud

The interest rate earned on the account : Your wealthy uncle established a $1,000 bank account for you when you were born. For the first 8 years of your life, the interest rate earned on the account was 6.7%. Since then, rates have been only 4.7%. Now you are 22 years old and ready to cash i..
Interest on retirement savings : A couple will retire in 50 years; they plan to spend about $40,000 a year in retirement, which should last about 25 years. They believe that they can earn 7% interest on retirement savings.
Respect to these interest and dividend payments : USAco derives over 90 percent of its gross income from its business operations in Canada. Are there any U.S. withholding requirements with respect to these interest and dividend payments? A citizen and resident of Country X hold a certificate of depo..
What is the role or place of structured methodologies, : What is the role or place of structured methodologies, data, and algorithms? What differs between object-oriented and object-based languages
What is the effective annual rate on loan with interest rate : In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $24,000 and the interest rate is 21.75%, the borrower "pays" 0.2175 × $24,000 = $5,220 immediately, thereby receiving net funds of $18,780 ..
Discuss the issues associated with disparate systems : Discuss the issues associated with disparate systems and how ERP systems overcome these issues. Vendors argue that integration issues occur frompeople, process, and informationperspectives.
What is the value of a perpetuity : What is the value of a perpetuity that pays $100 every 6 months forever? The discount rate quoted on an APR basis is 6.5%.
Real interest rate at retirement : You will almost certainly be a millionaire by the time you retire in 45 years. Bad news: The inflation rate over your lifetime will average about 3.7%.  What will be the real value of $1 million by the time you retire in terms of today’s dollars?
What are the differences between a class and an object : What are the differences between a class and an object? What are the similarities and differences of the array and parallel array structures? What is an example of data that is appropriately stored in a parallel array structure

Reviews

Write a Review

Financial Management Questions & Answers

  Forward price and the initial value of the forward contract

A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding. What are the forward price and the initial value of the f..

  How does net working capital affect

How does net working capital affect the NPV of a 5-year project if working capital is expected to increase by $30,000 and the firm has a 16% cost of capital?

  What is the value per share of your firms stock

Assume that the average firm in your company's industry is expected to grow at a constant rate of 4% and that its dividend yield is 7%. Your company is about as risky as the average firm in the industry, but it has just successfully completed some R&..

  Compute the unit sales price to earn budgeted target profit

Compute the unit sales price at which Blake must sell its product in the current year in order to earn a budgeted target profit of £200,000.

  Disadvantages of earnings management

why is it considered necessary to make adjustments at the end of each accounting period? Explain why the advantages of 'accrual accounting' outweigh the disadvantages of 'earnings management'.

  What gold futures price per ounce will trigger a margin call

A company enters into a long futures contract to buy 200 ounces of gold for $1,257 per ounce. The initial margin is $4,000 and the maintenance margin is $1,000. What gold futures price per ounce will trigger a margin call? (Margin of error: +/- $1)

  Depreciation expense-capital expenses-debt-debt principal

Mary has EAT, depreciation expense, capital expenses, debt and debt principal payments of $2m, $2.8m, $1.3m, $40m and $1.5m respectively. Moreover, Mary had operating profit of $2.5 million and its assets went from a total of $35 to $38 million. Addi..

  Assume that you have been asked to place a value on the

assume that you have been asked to place a value on the fund capital equity of besthealth a not-for-profit hmo. its

  What is the net present value of this investment

You are making a $63,500 investment and feel that a 10% rate of return is reasonable given the nature of the risks involved. You feel you will receive $19,500 in the first year, $24,700 in the second year and $43,200 in the third year. What is the ne..

  One of the most common business tools throughout

swot analysis and strategic scorecardone of the most common business tools during organizational assessment is the

  Firm has an issue of preferred stock outstanding

A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 13 percent. The value of the preferred stock is ________.

  What is the price of the bond

A bond with 20 years until maturity has a coupon rate of 7.4 percent and a yield to maturity of 7.5 percent. What is the price of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your resp..

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