The Besington glass company entered into a loan agreement with the firm\'s bank
ID: 2757914 • Letter: T
Question
The Besington glass company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 29 basis points (0.29 percent) over an index based on LIBOR. In addition the loan adjusted weekly based on the closing value of the index for the previous week and had a maximun annual rate of 2.18 percent and a min of 1.73 percent. Calculate the rate of interest for weeks 2 through 10.
1.89%
Date LIBOR Week 1 1.96% Week 2 1.65% = ANSWER 2.18% Week 3 1.46% = ANSWER 1.94% Week 4 1.36% Week 5 1.65% Week 6 1.67% Week 7 1.75% Week 8 1.88% Week 91.89%
Explanation / Answer
The formuale you should use is LIblr+.29%
Week 2=1.65%+0.29%=1.94%
Week 3=1.46%+.29%=1.75%
Week 4=1.36%+.29%=1.65%
week 5=1.65%+.29%=1.94%
week 6=1.67%+.29%=1.96%
week=7=1.75%+.29%=2.04%
week=8=1.88%+.29%=2.27%the minimum of(2.18%,2.27%) so ot is 2.18%
week 9=1.89%+.29%=2.28% the minimum of(2.18%,2.28%) so ot is 2.18%
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