Holland Construction Co. has an outstanding 180-day bank loan of $404,000 at an

Question

Holland Construction Co. has an outstanding 180-day bank loan of $404,000 at an annual interest rate of 9.6%. The company is required to maintain a 16% compensating balance in its checking account. What is the effective interest rate on the loan? Assume the company would not normally maintain this average amount. (Use 360 days in a year. Round your answer to 2 decimal places.) 14.43% 10.43% 13.43% 11.43%

An issue of common stock is selling for $56.80. The year end dividend is expected to be $2.35 assuming a constant growth rate of 4%. What is the required rate of return? (Round your answer to 1 decimal place.)

If expected dividends grow at 4% and the appropriate discount rate is 6%, what is the value of a stock with an expected dividend of $2.35? (Round your answer to 2 decimal places.) $118.50 $176.25 $117.50 $58.75

Explanation / Answer

1)

Effective interest rate:

= Annual interest rate/(1-Compensating balance)

= 9.60%/(1-16%)

= 9.60%/0.84

= 11.43%

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

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