2) A bank loan has a quoted annual rate of 6%. However, the borrower must maintain a balance of 25% of the amount of the loan, and the balance does not earn any interest.
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?
1) A firm's profit margin is 10% and its asset turnover ratio is .6. It has no debt, has net income of $10 per share, and pays dividends of $4 per share. What is the sustainable growth rate?
Asset turnover ratio=0.6
Earnings on equity=6.00%=0.6*0.1
Earning per share=$10
Plowback ratio= ...
Answers two questions on : 1) sustainable growth rate, 2) effective rate of interest