d = annual net patient revenue *(5 days/365)* interest rate% = ?
Annual bank fee = Bank fee *12 (months in the year since its annual fee) = ?
So, annual savings = Interest Earned – Annual bank fee = ?
2. St. Luke’s Convalescent Center has $200,000 in surplus funds that it wishes to invest in marketable securities. If transaction costs to buy and sell the securities are $2,200 and the securities will be held for three months, what required annual yield must be earned before the investment makes economic sense?
Surplus fund = $200,000
Transaction cost = $2,200
Holding period = 3 months
So, yield should be minimum $2,200.
Let minimum required annual yield = r%
Therefore, surplus fun *(3/12)*r% = minimum yield
3. Your firm is considering the following three alternative bank loans for $1,000,000: Assume that you would normally not carry any bank balance that would meet the 20 percent compensating balance requirement. What is the rate of annual interest on each loan?
a) 10 percent loan paid at year end with no compensating balance
Annual interest rate = 10%
b) 9 percent loan paid at year end with a 20 percent compensating ba
15. Bond ratings and prices A corporate bond with an 8.5 percent coupon has 10 years left to maturity. It has had a credit rating of A and a yield to maturity of 10 percent. The firm has recently gotten into some trouble and the rating agency is downgrading the bonds to BBB. The new appropriate discount rate will be 11.5 percent. What will be the change in the bond's price in dollars? Assume interest payments are paid semi-annually and par value is $1,000.
1 answer