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# Interest Rates and the Cost of Debt

### Graphical approximation techniques.

Using graphical approximation techniques to answer the question. When would an ordinary annuity consisting of quarterly payments of \$646.72 at 8% compounded quarterly be worth more than a principal of \$8,900 invested at 4% simple interest? The annuity would be worth more than the principal in approximately ____ years.

### Down payment on house depositing \$259 per month

In order to accumulate enough money for a down payment on a house, a couple deposits \$259 per month into an account paying 6% compounded monthly. If payments are made at the end of each period, how much money will be in the account in 6 years? Please show process with answer. step by step for learning needs.

### Doubling Time Compounded Semiannually and Continuously

How long will it take money to double it is invested at 7% compounded semiannually and 6.6% compounded continuously? 7% = x years compounded semiannually 6.6% = x years compounded continuously

### IRA \$13,000 - 7% compounded daily - 34 years from now

An IRA has \$13,000 in it, the owner decides not to add any more money to the account other than the interest earned at 7% compounded daily. How much will be in the account 34 years from now when owner reaches retirement age. (365 day year) Please show process on how to get to amount in account.

### Repayment Amount and Interest Rate

A radio commercial for a loan company states: You only pay 26 cents a day for each \$500 borrowed. If you borrow \$1,491. for 299 days, what amount will you repay, and what annual interest rate is the company actually charging? a. amount you repay = ? b. annual interest rate = ?

### Calculating the loan amount..

Suppose Subaru of America, Inc. wishes to borrow money from UBS. They agree on an annual rate of 10%. 1. Suppose Subaru agrees to repay \$500 million at the end of 4 years. How much will UBS lend Subaru? 2. Suppose Subaru agrees to repay a total of \$500 million at a rate of \$125 million at the end of each of the next 4 years.

### Interest at the end of the year

You receive a credit card application offering an intro rate of 2.4% per year, compounded monthly for the first six months, and then increasing to 18% compounded monthly. Assuming you transfer \$6,000 from another card and make no subsequent payments, how much interest will you owe at the end of the first year? Use formulas,

### Calculating interest and growth rates

Calculating Interest Rates: In January 2007, the average house price in the United States was \$314,600. In January 2000, the average price was \$200,300. What was the annual % increase in selling price?

### Intermediate financial accounting; Bond interest: effective interest method; straight line method; journal entries

Titania Co. sells \$400,000 of 12% bonds on June 1, 2010. The bonds pay interest on December 1 and June 1. The due date of the bonds is June 1, 2014. The bonds yields 10%. On October 1, 2011, Titania buys back \$120,000 worth of the bonds for \$126,000 (includes accrued interest). Give the entries through December 31, 2012.

### This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "\$71,000 Instant Credit! 10.4% Simple Interest! 6 Years to Pay! Low, Low Monthly Payments!" The APR on this loan is _____%, and the EAR is _____%. (Do not include the percent signs (%).

Can you help me get started on this assignment? This problem illustrates a deceptive way of quoting interest rates called add-on interest. Imagine that you see an advertisement for Crazy Judy's Stereo City that reads something like this: "\$71,000 Instant Credit! 10.4% Simple Interest! 6 Years to Pay! Low, Low Monthly Payments

### Compute the present value of interest tax shields generated by these three debt issues.

1. Compute the present value of interest tax shields generated by these three debt issues. Consider corporate taxes only. The marginal tax rate is T^c = .35. a. A \$1000, one-year loan at 8%. b. A five-year loan of \$1000 at 8%. Assume no principal is repaid until maturity. c. A \$1000 perpetuity at 7%.

### Zero coupon bond: Calculate rates for maturities of 6, 12, 18 and 24 months

There are four bonds; Bond A with a principal of \$100, maturity time is 6 months, annual coupon is \$0, bond price is \$98. Bond B with a principal of 100, maturity time of 12 months, annual coupon is \$0, bond price is \$95. Bond C with a principal of \$100, maturity time of 18 months, annual coupon of \$6.20, bond price is \$101. Bon

### semi-annual-compounding

Jose Oliva is considering two investment options for a \$1500 gift he received for graduation. Both investments have 8% annual interest rates. One offers quarterly compounding; the other compounds on a semiannual basis. Which investment should he choose? Why?

### Bond interest per year

If I have purchased a 15 yr, \$1,000 face value bond that pays interest on a semi-annual basis for \$1,324.23. If the market's effective annual required rate of return is 8.16% (4% semi-annually) how much interest does the bond pay each year?

### Midland Chemical: Compare loan options and calculate interest effects

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The small chemical company's amount to be borrowed is: \$500,000 The bank offers a rate of 9 percent with a 20 percent compensating balance requirement, or as an alternative, 11.5 percent with additional fees of \$5,575 to cover services the

### Calculate the Present Value of a Perpetuity

What is the present value of a perpetuity of \$100 per year if the appropriate discount rate is 7%? If interest rates in general were to double and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?

### Unknown Interest Rates

Calculating Interest Rates. I am trying to solve the unknown interest rates for each of the following: Present Value Years Interest rate Future Value \$715 6 \$1381 \$905 7

### Allocation of interest costs

The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a \$20,000,000 bond issuance, the Electric Mixer Division used \$14,000,000 and the Electric Lamp Division used \$6,000,000 for expansion. Interest costs on the bond totaled \$1,500,000 for the year. What amount of The Hassan Corporation has an E

### interest-rate-needed-child-education

Assume the total cost of an education will be \$320,00 when your child enters college in 18 years. You presently have \$50,000 to invest. What annual rate on interest must you earn on your investment to cover the cost of your child's college education?

### Calculate the after-tax cost of debt for the following situations...

Calculate the after-tax cost of debt for the following situations: Pre-Tax Cost Corporate Tax Rate After-Tax Cost a 15% 22% b 12% 15% c 8% 18%

### Interest Rate - credit card example

Answer the below question and explain calculations please. Suppose that a friend who spent her junior year abroad has accumulated \$2400 worth of debt on her credit card. The card has an APR of 19.6 percent. If she doesn't charge anything additional on the card, how much should she pay each month to pay off the card in 9 mo

### Component Cost of Debt for calculating WACC

A company's 6%, semiannual payment, \$1,000 par value bond that matures in 30 years sells at a price of \$515.16. The company's federal-plus-state tax rate is 40%. What is the firm's component cost of debt for purposes of calculating the WACC? (Hint: Base your answer on the nominal rate)

### Effective rate of discounted loan

Discount Loan. A discount bank loan has a quoted annual rate of 6 percent. 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?

### Conflicts of interest: Co-worker is starting a second business and missing work

Conflicts of interest can occur at any time. Select one of the two scenarios and elaborate on what you would do in that situation. 2. You work for a computer parts and software distributor. Your co-worker and friend is starting up a second business installing and servicing personal computers. She asks you not to disclose any

### Present value and interest rate

Compute the present value of \$1000.00 to be received in 5 years if the interest rate is likely to be 3% over that period. How does the present value change if the interest rate is higher than 3%? Lower?

### You are considering investing in a Third World bank account that pays a nominal annual rate of 18%, compounded monthly

You are considering investing in a Third World bank account that pays a nominal annual rate of 18%, compounded monthly. If you invest \$5,000 at the beginning of each month, how many months will it take for your account to grow to \$250,000? Round fractional years up.

### Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate.

Would you be able to assist with this question? Particularly need help with e), f), g). Xhat Inc has 12,000 bonds outstanding that have a 6% coupon rate. The bonds are selling at 98% of face value, pay interest semi-annually, and mature in 28 years. There are 400,000 shares of 9% \$100 preferred stock outstanding with a curren

### Rajiv and Laurie Amin are recent college graduates looking

Rajiv and Laurie Amin are recent college graduates looking to purchase a new home. They are purchasing a \$200,000 home by paying \$20,000 down and borrowing the other \$180,000 with a 30-year loan secured by the home. The Amins have the option of (1) paying no discount points on the loan and paying interest at 8 percent or (2) pay

### Expected future exchange rate

4. Using the International Fisher Effect, calculate expected future exchange rate in one year, if the interest rate is 6% on Swiss Franc and 15% on US \$ and the spot exchange rate at time 0 is \$ 0.9143/SFR.

### Interest Capitalization for Nguyen Corp's constructed assets

Nguyen Corp constructed assets costing \$600 000. The Weighted average accumulated expenditures on these assets during the year was \$400 000. To help pay for construction, \$320 000 was borrowed at 10% at the beginning of year. Some funds were not needed for construction so thus were temporarily invested in short term securities w
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