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Interest Rates and the Cost of Debt

Repayment Amount and Interest Rate

A radio commercial for a loan company states: You only pay 26 cents a day for each $500 borrowed. If you borrow $1,491. for 299 days, what amount will you repay, and what annual interest rate is the company actually charging? a. amount you repay = ? b. annual interest rate = ?

Calculating the loan amount..

Suppose Subaru of America, Inc. wishes to borrow money from UBS. They agree on an annual rate of 10%. 1. Suppose Subaru agrees to repay $500 million at the end of 4 years. How much will UBS lend Subaru? 2. Suppose Subaru agrees to repay a total of $500 million at a rate of $125 million at the end of each of the next 4 years.

Interest at the end of the year

You receive a credit card application offering an intro rate of 2.4% per year, compounded monthly for the first six months, and then increasing to 18% compounded monthly. Assuming you transfer $6,000 from another card and make no subsequent payments, how much interest will you owe at the end of the first year? Use formulas,

Calculating interest and growth rates

Calculating Interest Rates: In January 2007, the average house price in the United States was $314,600. In January 2000, the average price was $200,300. What was the annual % increase in selling price?

This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "$71,000 Instant Credit! 10.4% Simple Interest! 6 Years to Pay! Low, Low Monthly Payments!" The APR on this loan is _____%, and the EAR is _____%. (Do not include the percent signs (%).

Can you help me get started on this assignment? This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "$71,000 Instant Credit! 10.4% Simple Interest! 6 Years to Pay! Low, Low Monthly Payments

Zero coupon bond: Calculate rates for maturities of 6, 12, 18 and 24 months

There are four bonds; Bond A with a principal of $100, maturity time is 6 months, annual coupon is $0, bond price is $98. Bond B with a principal of 100, maturity time of 12 months, annual coupon is $0, bond price is $95. Bond C with a principal of $100, maturity time of 18 months, annual coupon of $6.20, bond price is $101. Bon

semi-annual-compounding

Jose Oliva is considering two investment options for a $1500 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding; the other compounds on a semiannual basis. Which investment should he choose? Why?

Bond interest per year

If I have purchased a 15 yr, $1,000 face value bond that pays interest on a semi-annual basis for $1,324.23. If the market's effective annual required rate of return is 8.16% (4% semi-annually) how much interest does the bond pay each year?

Midland Chemical: Compare loan options and calculate interest effects

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company's amount to be borrowed is: $500,000 The bank offers a rate of 9 percent with a 20 percent compensating balance requirement, or as an alternative, 11.5 percent with additional fees of $5,575 to cover services the

Calculate the Present Value of a Perpetuity

What is the present value of a perpetuity of $100 per year if the appropriate discount rate is 7%? If interest rates in general were to double and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?

Unknown Interest Rates

Calculating Interest Rates. I am trying to solve the unknown interest rates for each of the following: Present Value Years Interest rate Future Value $715 6 $1381 $905 7

Allocation of interest costs

The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division used $14,000,000 and the Electric Lamp Division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of The Hassan Corporation has an E

interest-rate-needed-child-education

Assume the total cost of an education will be $320,00 when your child enters college in 18 years. You presently have $50,000 to invest. What annual rate on interest must you earn on your investment to cover the cost of your child's college education?

Interest Rate - credit card example

Answer the below question and explain calculations please. Suppose that a friend who spent her junior year abroad has accumulated $2400 worth of debt on her credit card. The card has an APR of 19.6 percent. If she doesn't charge anything additional on the card, how much should she pay each month to pay off the card in 9 mo

Effective rate of discounted loan

Discount Loan. A discount bank loan has a quoted annual rate of 6 percent. a) What is the effective rate of interest if the loan is for 1 year and is paid off in one payment at the end of the year? b) What is the effective rate of interest if the loan is for 1 month?

Present value and interest rate

Compute the present value of $1000.00 to be received in 5 years if the interest rate is likely to be 3% over that period. How does the present value change if the interest rate is higher than 3%? Lower?

Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate.

Would you be able to assist with this question? Particularly need help with e), f), g). Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate. The bonds are selling at 98% of face value, pay interest semi-annually, and mature in 28 years. There are 400,000 shares of 9% $100 preferred stock outstanding with a curren

Rajiv and Laurie Amin are recent college graduates looking

Rajiv and Laurie Amin are recent college graduates looking to purchase a new home. They are purchasing a $200,000 home by paying $20,000 down and borrowing the other $180,000 with a 30-year loan secured by the home. The Amins have the option of (1) paying no discount points on the loan and paying interest at 8 percent or (2) pay

Expected future exchange rate

4. Using the International Fisher Effect, calculate expected future exchange rate in one year, if the interest rate is 6% on Swiss Franc and 15% on US $ and the spot exchange rate at time 0 is $ 0.9143/SFR.

Interest Capitalization for Nguyen Corp's constructed assets

Nguyen Corp constructed assets costing $600 000. The Weighted average accumulated expenditures on these assets during the year was $400 000. To help pay for construction, $320 000 was borrowed at 10% at the beginning of year. Some funds were not needed for construction so thus were temporarily invested in short term securities w

Determinants of interest rates

Please help me figure out the solutions to these problems. You have found three investment choices for a one year deposit: 10% apr compounded monthly, 10% apr compounded annually, and 9% apr compounded daily. Compute the EAR for each investment choice. (assume 365 days in the year) A 30 year mortgage with and EAR 0f 5

Targeted retirement

Suppose you want retire when you have $1,000,000. If the interest rates paid by banks on individual retirement accounts (IRAs) rise from 4 percent to 8 percent, what will happen to the time it takes to reach your targeted retirement savings amount?

Debt to equity ratio, cost of equity, no taxes, tax rate of 34%

1) A firm has a debt-to-equity ratio of .60. Its cost of debt is 8%. Its overall cost of capital is 12%. What is its cost of equity if there are no taxes or other imperfections? 2) Wild Flowers Express has a debt-equity ratio of .60. The pre-tax cost of debt is 9% while the unlevered cost of capital is 14%. What is the cost o

How much is the company planning to raise toward the factory

Optimism Inc. anticipates the need for the factory expansion four years from today. the firm has determined that it will have the necessary funds for expansion if it puts $400,000 per year into a stock portfolio expected to earn 9% per yer. Deposits will be made at the endo of each year. How much is the company planning to ra

Target Corporation: Memo explaining what information will be highlighted

Details: Refer to Target Corporation's financial statements (http://investors.target.com/phoenix.zhtml?p=irol-irhome&ref=nav%5Ffooter%5Finvestors&c=65828) . Target Corporation is currently seeking additional capital to expand its operations. Two companies have shown interest in providing additional capital. Company #1 is

How fast does your money grow

Barry wants to invest in 5-10 years. A financial planner told him that a ROTH IRA would be more profitable over time than a regular IRA. Use formula FV=$1(1+R)n where R is the period rate and n is the number of periods. - Calculate the accumulated value of an investment of $2,000 at 6% compounded annually for 35 years. -

Note Receivable with interest.

On September 1, 2008, Active Networking sold a computer networking system to Finn Motors for $26,000. Finn Motors signed a note with interest at 9%, agreeing to pay the principal and interest in six months. Active Networking's year end is December 31. What items would be included on Active Networking's income statement and ba