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pogonyaev
3 years ago
9

Dr. Ruth is going to borrow $8,700 to help write a book. The loan is for one year and the money can be borrowed at either the pr

ime rate or the LIBOR rate. Assume the prime rate is 9 percent and LIBOR 0.5 percent less. Also assume there will be a $75 transaction fee with LIBOR (this amount must be added to the interest cost with LIBOR). a. What is the effective interest rate on the LIBOR loan
Business
1 answer:
Contact [7]3 years ago
3 0

Answer: 9.37%

Explanation:

The effective interest rate on the LIBOR loan is calculated as follows based on the information given in the question:

Principal = $8700

Prime rate = 9%

LIBOR net interest rate = 9% - 0.5% = 8.5%

Interest Cost will be:

= 8700 × 8.50 × 1/100

= 739.50

We the add the transaction Fee of $75 and thus will be:

= $739.50 + $75.00

= $814.50.

Then, the effective interest rate will be:

= $814.50 × 100/$8700

= $814.50 × $0.0115

= 9.37%

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The closest to the minimum number of consumers needed to obtain the estimate with the desired precision is (b) 271

Explanation:

When the prior estimate of population proportion is not given , then the formula to find the sample size is given by :-

n=0.25(\frac{z^{*} }{E} )^{2}

where E = Margin of error.

z* = Critical z-value.

As per given , we have

E = 5%=0.05

Confidence level = 90%

The critical value of z at 90% is 1.645  (By z-table)

Put all values in the formula , we get

n=0.25(1.645/0.05)²

n=0.25(32.9)²

n=270.6025≈271

Thus, the minimum sample size needed = 271

Hence , the correct answer is 271 .

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