4

Determine the actual annual interest rate on a $40,000 line of credit with an annual percentage rate of 12% compounded monthly. The bank requires that a 10% compensating balance be placed in an interest-bearing account that pays an annual percentage rate of 1.25% compounded monthly. The average daily balance is anticipated to be $25,000, excluding the compensating balance and interest due on the line of credit.

Q15

Determine the effective annual interest rate on an $85,000 line of credit with an annual percentage rate of 9.25% compounded monthly. The bank requires that a 2% commitment fee be paid on the unused balance of the line of credit. The average daily balance is anticipated to be $70,000.

Q16

Determine the effective annual interest rate on a $25,000 line of credit with an annual percentage rate of 8.75% compounded monthly. The bank requires that a 1.5% commitment fee be paid on the unused balance of the line of credit. The average daily balance is anticipated to be $10,000.

Q17

A supplier has offered your company a 0.5% discount for all bills that are paid 10 days after they are billed. The bills would normally be due 30 days after they are billed. What is the return on paying the bills early? If your company can borrow funds from a line of credit at a yield of 8%, is it financially attractive to pay the bills early? The line of credit requires a compensating balance.

Q18

A supplier has offered your company a 1% discount for all bills that are paid

15 days after they are billed. The bills would normally be due 45 days after they are billed. What is the return on paying the bills early? If your company can borrow funds from a line of credit at a yield of 13%, is it financially attractive to pay the bills early? The line of credit requires a compensating balance.

Q19

Using the principles from Sidebar 16-3, prepare an amortization schedule for a 30-year loan with monthly payments. The amortization schedule should be set up as shown in Figure 16-2 and allow the user to change the schedule by changing the APR and the loan amount (the ending principal for month 0). The spreadsheet should calculate the monthly payment. Be sure to round the monthly payment and monthly interest to whole pennies. Test your spreadsheet by entering the data from Appendix E and compare your spreadsheet’s solution to the appendix. Hint: The last payment needs

to be adjusted to bring the balance to zero at the end of 30 years.