Question

Charles & Garrett Associates arranged a $9 million revolving credit agreement with a group of banks....

Charles & Garrett Associates arranged a $9 million revolving credit agreement with a group of banks. The firm must pay an annual commitment fee of 0.5% on the unused balance of the loan commitment. On the used portion of the revolver, it must pay 1.5% above the prime rate. The prime rate is expected to be 9% over the year. The firm faces a compensating balance requirement of 10% and its normal deposit balance is zero. If the firm borrows $6 million immediately once the revolver is signed, and repays at the end of one year, what is the AFC of the revolver?

Group of answer choices

13.26%

14.69%

12.62%

13.02%

11.94%

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Charles & Garrett Associates arranged a $9 million revolving credit agreement with a group of banks....
Charles & Garrett Associates arranged a $9 million revolving credit agreement with a group of banks. The firm must pay an annual commitment fee of 0.5% on the unused balance of the loan commitment. On the used portion of the revolver, it must pay 1.5% above the prime rate. The prime rate is expected to be 9% over the year. The firm faces a compensating balance requirement of 10% and its normal deposit balance is zero. If the firm borrows...
The Joker Casino and Resort has a revolving credit agreement with Commerce Bank under which the...
The Joker Casino and Resort has a revolving credit agreement with Commerce Bank under which the company can borrow up to $5 million at an annual interest rate of 1% point above the prime rate (currently 9%). The Joker is required to maintain a 10 percent compensating balance on any funds borrowed under the agreement and to pay a 0.4% commitment fee on the unused portion of the credit line. Both the commitment fee and the interest expense are due...
AT&D has a revolving credit agreement with Bank Of Sweet South (BOSS) under which AT&D can...
AT&D has a revolving credit agreement with Bank Of Sweet South (BOSS) under which AT&D can borrow up to $10 million at an annual interest rate of 1.5% point above the prime rate. Prime rate is currently at 9.5%. The AT&D is required to maintain a 18% compensating balance on any funds borrowed under the agreement and to pay a 0.5% commitment fee on the unused portion of the credit line. Both the commitment fee and the interest expense are...
Kalamazoo Company has a $5 million revolver with its bank to borrow at an annual interest...
Kalamazoo Company has a $5 million revolver with its bank to borrow at an annual interest rate of 4 percentage point above the prime rate (currently 7 percent). The agreement requires the company to maintain a 10% average compensating balance on any funds borrowed under the agreements, as well as to pay a 0.75 percent commitment fee on the unused portion of the credit line. The company’s average borrowing under the agreement during the year is expected to be $3...
Fernandez has applied for a revolving credit line of $ 9 million to assist in marketing...
Fernandez has applied for a revolving credit line of $ 9 million to assist in marketing a new product line. The terms of the loan will be as follows: (a) All the loans will be discount loans. (b) A commitment fee of 0.1 percent on the unused portion of the loan will be charged. (c) The compensatory balance requirements will be 3 percent on the total credit line and 2 percent on the outstanding loans. (d) The bank will pay...
Mr. Fernandez has applied for a revolving credit line of $ 4 million to assist in...
Mr. Fernandez has applied for a revolving credit line of $ 4 million to assist in marketing a new product line. The terms of the loan will be as follows: (a) The loan will not be a discount loan. ( b) A commitment fee of 0.2 percent on the unused portion of the loan will be charged. (c) The compensatory balance requirements will be 7 percent on the total credit line and 6 percent on the outstanding loans. ( d)...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary...
Please answer the following Case analysis questions 1-How is New Balance performing compared to its primary rivals? How will the acquisition of Reebok by Adidas impact the structure of the athletic shoe industry? Is this likely to be favorable or unfavorable for New Balance? 2- What issues does New Balance management need to address? 3-What recommendations would you make to New Balance Management? What does New Balance need to do to continue to be successful? Should management continue to invest...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how...
Delta airlines case study Global strategy. Describe the current global strategy and provide evidence about how the firms resources incompetencies support the given pressures regarding costs and local responsiveness. Describe entry modes have they usually used, and whether they are appropriate for the given strategy. Any key issues in their global strategy? casestudy: Atlanta, June 17, 2014. Sea of Delta employees and their families swarmed between food trucks, amusement park booths, and entertainment venues that were scattered throughout what would...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT