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Interest Rate of Borrowing $2,000,000

A firm needs to borrow $2,000,000 for the next year to finance working capital. It¿s bank as proposed a combination of loan products as follows: 1) $750,000 from a line of credit at 12%; $600,000 at 9% collateralized by inventory; and 3) the remainder at 7% with a second mortgage on the factory building. If the firm accepts the bank¿s proposal, what would be the overall interest rate?

Interest on a variable rate $1,000 bond was $65.00 last year and will be $67.50 this year. What is the interest rate changed in basis points?

Solution Preview

1. The amount is 750,000 and the rate is 12%. The interest paid is 750,000X12%=90,000
2. The amount is 600,000 and the rate is 9%. The interest paid is ...

Solution Summary

The solution explains how to calculate the overall interest rate