FIN-320-X5407 Principles of Finance 18EW Latruma Sinegal &1 6/26/18 11:02 PM Hom

Question

FIN-320-X5407 Principles of Finance 18EW Latruma Sinegal &1 6/26/18 11:02 PM Homework: 7-1 MyFinanceLab Assignment Save Score: 0 89 of 4 pts of 12 (1 complete) Hw Score: 1 7896, O 89 of 50 pt ?Question Help * Related to Checkpoint 9.1) (Floating rate loans) The Bensington Glass Company entered into a loan agroement with the Sem's bank to inance the Sm's working capital The loan called for a Boating rate that was 28 basis points (0 28 percent) over an index based on LIBOR, in addition, the loan adjusted wweekly based on the cdosing value of the index for the previous week and had a maximum annual rate of 2 23 percent and a minimum of 1.73 percent. Calculate the rate of interest for weeks 2 theough 10 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 192% 165% 149% 135% 163% 166% 172% 1.87% The rate of interest for week 2 is?% (Round to two decimal places) Enter your answer in the answer box and then cick Check parts Type here to search

Explanation / Answer

In order to calculate the interest rate for week, we need to add 0.28% to the LIBOR rate given for the individual weeks. However, as given in question, effective rate has a floor of 1.73% (interest rate can't be lower than this) and cieling of 2.23% (interest rate can't be higher than this).

All the interest rates from Week 2 to Week 8 are withing the florr and ceiling range given, except Week 4, where the interest rate charged would be the floor rate of 1.73%.

Date

LIBOR

Spread

Interest Rate

Effective interest rate

Week 2

1.65%

0.28%

1.93%

1.93%

Week 3

1.49%

0.28%

1.77%

1.77%

Week 4

1.35%

0.28%

1.63%

1.73%

Week 5

1.63%

0.28%

1.91%

1.91%

Week 6

1.66%

0.28%

1.94%

1.94%

Week 7

1.72%

0.28%

2.00%

2.00%

Week 8

1.87%

0.28%

2.15%

2.15%

LIBOR for Week 9 and 10 were not visible in question above, but use the same methodology. Just remember, if interest rate is above 2.23%, 2.23% would be the charge and if it is lower than 1.73%, 1.73% would be the charge.

Date

LIBOR

Spread

Interest Rate

Effective interest rate

Week 2

1.65%

0.28%

1.93%

1.93%

Week 3

1.49%

0.28%

1.77%

1.77%

Week 4

1.35%

0.28%

1.63%

1.73%

Week 5

1.63%

0.28%

1.91%

1.91%

Week 6

1.66%

0.28%

1.94%

1.94%

Week 7

1.72%

0.28%

2.00%

2.00%

Week 8

1.87%

0.28%

2.15%

2.15%

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.