Solutions to Web Appendix 16B

Solutions to Web Appendix 16B -...

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Web Appendix 16B Short-Term Loans and Bank Financing Answers to Questions 16B-1 The chapter discussed two common methods of calculating bank interest charges:   regular, or  simple, interest and add-on interest.   This web  appendix discusses two  additional methods:  discount interest and compensating balances. 16B-2 A compensating balance is the amount a lender requires to be on hand in your account.  If this  amount required exceeds the amount the firm would normally hold on deposit, then this excess  must be deducted from the loan amount.  The compensating balance reduces the funds available  and thus increases the cost of the loan. Appendix 16B  Short-Term Loans and Bank Financing Answers and Solutions 1
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Solutions to Problems 16B-1 Loan required = $100,000; discount basis = 11% nominal annual rate; face value = ? Face value = 
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This note was uploaded on 03/21/2010 for the course BUSINESS AB102 taught by Professor Woo during the Spring '10 term at Nanzan.

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Solutions to Web Appendix 16B -...

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