The financial managers at Henderson Corporation are arranging the financing for working capital requirements for the upcoming year. Henderson'slocal bank offers a discount interest loan at a quoted (simple) interest rate of 12.00%. With a discount interest loan, interest is payable up front, andthe actual amount received is less than the face amount of the loan. Suppose Henderson applies for a $300,000 loan with a nine-month term.Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan.Interest paymentAmount of cash receivedAnnual percentage rate (APR)Effective annual rate (EAR)What is the nine-month rate if the bank charges a $100 processing fee?O 9.93%O 9.03%O 8.94%ValueO 13.19%

When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

Answered: The financial managers at Henderson…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

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7. Computing the cost of a discount interest loan The financial managers at Wallace Corporation are arranging the financing for working capital requirements for the upcoming year. Wallace's local bank offers a discount interest loan at a quoted (simple) interest rate of 8.00%. With a discount interest loan, interest is payable up front, and the actual amount received is less than the face amount of the loan. Suppose Wallace applies for a $300,000 loan with a nine-month term. Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan. Interest payment Amount of cash received Annual percentage rate (APR) Effective annual rate (EAR) What is the nine-month rate if the bank charges a $100 processing fee? O 5.78% O 6.03% O 8.51% Value O 6.42%
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