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FM27 7 - 000 4 $ = 16 Precise effective rate $50,000 = ∑...

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c. 0 1 | | i = ? 50,000 -50,000 - 4,375 (discount interest) 7,500 - 7,500 (compensating balance) -42,500 38,125 With a financial calculator, enter N = 1, PV = 38125, PMT = 0, and FV = -42500 to solve for I = 11.4754% 11.48%. Note that, if Hawley actually needs $50,000 of funds, he will have to borrow 15 . 0 0875 . 0 1 000 , 50 $ = $65,573.77. The effective interest rate will still be 11.48%. d. Approximate annual rate = ) /2 000 , 50 ($ ) 000 , 50 )($ 08 . 0 ( = 000 , 25 $ 000
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Unformatted text preview: 000 , 4 $ = 16%. Precise effective rate: $50,000 = ∑ = + + + 12 1 t 12 d t d ) r 1 ( 000 , 4 $ ) r 1 ( 67 . 166 , 4 $ r d , the monthly interest rate, is 1.1326%, found with a financial calculator. Input N = 12; PV = 50000; PMT = -4166.67; FV = -4000; and I = ?. The precise effective annual rate is (1.011326) 12- 1.0 = 14.47%. Alternative b has the lowest effective interest rate. Answers and Solutions: 27 - 7...
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