Spreadsheet Exercise<\/p>\n
Your company is considering manufacturing protective cases for a popular new smart-phone. Management decides to borrow $200,000 from each of two banks, First American and First Citizen. On the day that you visit both banks, the quoted prime interest rate is 7%. Each loan is similar in that each involves a 60-day note, with interest to be paid at the end of 60 days.<\/p>\n
The interest rate was set at 2% above the prime rate on First American\u2019s fixed-rate note. Over the 60-day period, the rate of interest on this note will remain at the 2% premium over the prime rate regardless of fluctuations in the prime rate.<\/p>\n
First Citizen sets its interest rate at 1.5% above the prime rate on its floating-rate note. The rate charged over the 60 days will vary directly with the prime rate.<\/p>\n
TO DO<\/p>\n
Create a spreadsheet to calculate and analyze the following for the First American loan:<\/p>\n
a. Calculate the total dollar interest cost on the loan. Assume a 365-day year.<\/p>\n
b. Calculate the 60-day rate on the loan.<\/p>\n
c. Assume that the loan is rolled over each 60 days throughout the year under identical conditions and terms. Calculate the effective annual rate of interest on the fixed-rate, 60-day First American note.<\/p>\n
Next, create a spreadsheet to calculate the following for the First Citizen loan:<\/p>\n
d. Calculate the initial interest rate.<\/p>\n
e. Assuming that the prime rate immediately jumps to 7.5% and after 30 days it drops to 7.25%, calculate the interest rate for the first 30 days and the second 30 days of the loan.<\/p>\n
f. Calculate the total dollar interest cost.<\/p>\n
g. Calculate the 60-day rate of interest.<\/p>\n
h. Assume that the loan is rolled over each 60 days throughout the year under the same conditions and terms. Calculate the effective annual rate of interest.<\/p>\n
i. Which loan would you choose, and why?<\/p>\n","protected":false},"excerpt":{"rendered":"
Spreadsheet Exercise Your company is considering manufacturing protective cases for a popular new smart-phone. Management decides to borrow $200,000 from each of two banks, First American and First Citizen. On the day that you visit both banks, the quoted prime Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-119367","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/119367","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=119367"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/119367\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=119367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=119367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=119367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}