On September 14, Jennifer Rick went to Park Bank to borrow $2,500 at interest. Jennifer plans to repay the loan on January 27. Assume the loan is on ordinary interest. Refer to Days in a year table.

Question

(a)
What interest will Jennifer owe on January 27? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

(b)
What is the total amount Jennifer must repay at maturity? (Use 360 days a year. Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Answer 1

a) Interest $ 110.15
b) Total amount $ 2,610.15

Explanation:

365
September 14 – 257
_______
108
+ 27
_______
135
________

$2,500 × 0.1175 × 135/360 = $110.16 +
+ $2,500
= $2,610.16

Answer 2

(defining capital structure weights) Templeton extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries for $350 million. Since the primary asset of this business is real estate, Templeton's management has determined that they will be able to borrow the majority of the money needed to buy the business. The current owners hae no debt financing but Templeton plans to borrow $260 million and invest only $90 milllion in equity in the acquisition. What weights should Templeton use in computing the WAAC for this acquisition?