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lana [24]
3 years ago
8

Southwestern Bank offers to lend you $50,000 at a nominal rate of 6.9%, compounded monthly. The loan (principal plus interest) m

ust be repaid at the end of the year. Woodburn Bank also offers to lend you the $50,000, but it will charge an annual rate of 8.1%, with no interest due until the end of the year. How much higher or lower is the effective annual rate charged by Woodburn versus the rate charged by Southwestern?a. 1.68% b. 1.98% c. 2.08% d. 1.78% e. 1.88%
Business
1 answer:
san4es73 [151]3 years ago
5 0

Answer:

0.98%

Explanation:

Note: Options provided is slightly different for this question

EAR = (1+APR/m)^m - 1  

EAR = (1+0.069/12)^12 - 1

EAR = (1.00575)^12 - 1

EAR = 1.07122449517 - 1

EAR = 7.12%

Hence, higher EAR  charged by Woodburn versus the rate charged by Southwestern = (8.1% - 7.12%) = 0.98%

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8 0
1 year ago
Wild Swings Inc.’s stock has a beta of 2.5. If the risk-free rate is 6% and the market risk premium is 7%, what is an estimate o
Bess [88]

Answer:

r = 0.235 or 23.5%

Explanation:

Using the CAPM, we can calculate the required/expected rate of return on a stock. This is the minimum return required by the investors to invest in a stock based on its systematic risk, the market's risk premium and the risk free rate.  

The formula for required rate of return under CAPM is,

r = rRF + Beta * rpM

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3 0
3 years ago
A company's flexible budget for 24,000 units of production showed per unit contribution margin of $2.50 and fixed costs, $31,200
ANTONII [103]

Answer:

The operating income will be:

Total contribution($2.50 x 29,000) = 72,500

Less: Fixed cost                                = 31,200

Operating income                            = 41,300

Explanation:

The contribution per unit is $2.50. This per unit contribution will be multiplied by the number of units produced and sold in order to obtain total contribution. Operating income is the excess of total contribution over fixed cost.

6 0
3 years ago
Hardigree Corporation uses a job-order costing system. Beginning balance in Work in Process $ 36,000 (1) Raw materials purchased
Katena32 [7]

Answer:

$242,000

Explanation:

Calculation of the total amount of manufacturing overhead actually incurred:

Particulars                                                    Amount

Indirect Materials                                         $42,000

Indirect labor                                                $101,000

Depreciation On factory equipment           $42,000

Additional Manufacturing Overhead          <u>$57,000</u>

Total Manufacturing Overhead incurred <u>$242,000</u>

7 0
3 years ago
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