Essay About Percent Loan And Principles Of Finance

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Principles of Finance
Tinker, Inc, finances its seasonal working capital need with short-term
bank loans. Management plans to borrow $65,000 for a year. The bank
has offered the company a 3.5 percent discounted loan with 1.5 percent
origination fee. What are the interest payment and the origination fee
required by the loan? What is the rate of interest charged by the bank?
Interest Paid = $65,000 x 3.5% = $2275
Origination Fee = $65,000 x 1.5% = $975
$65,000 – $2,275 – $975 = $61,750
Rate of Interest = $3,250/61750
0.052631579
5.26%
Ch 26-5
An individual wishes to borrow $10,000 for a year and is offered the following
alternatives:
a. A 10 percent loan discounted in advance.
P0(1 + i)n = Pn
9000(1 + i)1 = 10,000
1 + i = 1.111111
i= 1.111 – 1 = .111 = 11.1%
b. A 11 percent straight loan (i.e., interest paid at maturity)
Int Paid x
12 =
Proceeds
# months
outstanding
1100 x
12 =
1,100
10,000
10,000
Which loan is more expensive?
The discounted loan is slightly more expensive, as the interest rate is 11.1%,
while the straight loan has an interest rate of 11%.
Ch 26-6
Which of the following terms of trade credit is the most expensive?
a. A 3 percent cash discount if paid on the 15th day with the bill due on
the 45th day 3/15, net 45.
irc = ( Pecentage discount ) x
( 360 )
( 100%-percent disc )
(Pay period –
disc period )
(0.03 )x
(360 ) =
(0.03)
x( 360)
(1 – .03)
(45-15)
(0.97)
.0309 X
12 =
0.3708
37.1%
b A 2 percent cash discount if paid on the 10th day with the bill due on
the 30th day, 2/10, net 30.
(.02) x
(360 ) =
(0.02)
X ( 360)
(1-.03)
(30-10)
(0.98)
.020408 X
18 =
0.367344
36.7%
The cash discount of 3/15, net 45 costs a small amount more.
The amounts above are shown at the simple rate. The
compounded rate will be even higher.
i – (Pn/P0)365/n -1
I= (100/97)365/30 -1 =
I = (1.0309)12.166 -1 = .4481 = 44.81%
I – (Pn/P0)365/n -1
I= (100/98)365/20 -1 =
I = (1.0204)18.25 -1 = .4456 = 44.6%
Again, the cash discount of 3/15, net
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“Principles of Finance” EssaysForStudent.com. 01 2017. 2017. 01 2017 < "Principles of Finance." EssaysForStudent.com. EssaysForStudent.com, 01 2017. Web. 01 2017. < "Principles of Finance." EssaysForStudent.com. 01, 2017. Accessed 01, 2017. Essay Preview By: bws801 Submitted: January 15, 2017 Essay Length: 849 Words / 4 Pages Paper type: Coursework Views: 546 Report this essay Tweet Related Essays An Enquiry Concerning the Principles of Morals What is a moral? This is a question that has plagued philosophers for many years. Is it possible to have a set of universal morals? 1,606 Words  |  7 Pages The Pleasure Principle The Pleasure Principle The Oxford Dictionary defines pleasure. It is a feeling of satisfaction or joy. It is enjoyment. It is a source of pleasure 1,522 Words  |  7 Pages Marketing Principles at Carefirst Bluecross Blueshield Marketing Principles Incorporated at CareFirst BlueCross BlueShield Andrй R. Lynch MGMT 3002- Principles of Marketing January 15, 2005 Walden University Dr. James Skertich Abstract Sam 1,686 Words  |  7 Pages Honest Money - Biblical Principles of Money and Banking Honest Money Biblical Principles of Money and Banking By Dr. Gary North Honest Money by Dr. Gary North is about where money originated from, 986 Words  |  4 Pages Similar Topics Finance Introductory Accounting Finance Get Access to 89,000+ Essays and Term Papers Join 209,000+ Other Students High Quality Essays and Documents Sign up © 2008–2020 EssaysForStudent.comFree Essays, Book Reports, Term Papers and Research Papers Essays Sign up Sign in Contact us Site Map Privacy Policy Terms of Service Facebook Twitter