FM27 33 - would only have approximate use of $100,000/2 = $50,000 Quarterly basis simple interest The face value of the loan is $100,000 Discount

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g. How large would the loan actually be in each of the cases in part f? Answer: Simple interest . The face value of the loan would be $100,000. Discount interest . The face value of the loan is calculated as: Face value = RATE NOMINAL 1 REQUIRED FUNDS = 08 . 0 1 000 , 100 $ = $108,695.65. Discount interest with compensating balance . The face value of the loan is calculated as: Face value = CB - RATE NOMINAL 1 REQUIRED FUNDS = 10 . 0 08 . 0 1 000 , 100 $ = $121,951.22. Installment loan . The face value of the loan is $100,000. Note that jaws would only have full use of the $100,000 for the first month and, over the course of the year, it
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Unformatted text preview: would only have approximate use of $100,000/2 = $50,000. Quarterly basis: simple interest . The face value of the loan is $100,000. Discount interest . The face value is calculated as: Face value = RATE NOMINAL 1 REQUIRED FUNDS − = 02 . 1 000 , 100 $ − = $102,040.82. Discount interest with compensating balance . The face value of the loan is calculated as: Face value = CB-RATE NOMINAL 1 REQUIRED FUNDS − = 10 . 02 . 1 000 , 100 $ − − = $113,636.36. Mini Case: 27 - 33...
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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