Pierce control systems

# Pierce control systems - Pierce Control Systems Case 9 1...

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Pierce Control Systems Case 9 1. Compensating balance = 10% or 0.10 \$10,000,000 Loan = \$11,111,111 2. Interest / Principal – compensating balance in dollars (x) days in the year/days loan outstanding 550,000/10,000,000 – 1,000,000 (x) 1 =6.11% The interest rate is higher than 6% prime rate 3. Interest / Principal – compensating balance in dollars (x) days in the year/days loan outstanding 400,000/10,000,000 – 1,000,000 (x) 1 = 4.44% In this scenario the rate is lower than the 6% prime rate 4. The difference between the 6% prime rate and the 8% longer-term interest rate shows that there is a credit crunch. Future interest will be higher.

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## This note was uploaded on 12/21/2011 for the course ECON 101 taught by Professor All during the Spring '11 term at SUNY Albany.

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Pierce control systems - Pierce Control Systems Case 9 1...

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