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**BUSI 320 Connect Homework 4 Liberty University Complete Answer**

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**BUSI 320 Connect Homework 4 Liberty University Complete Answer**

**The below shown questions is just one version sample.****Download the excel document for the complete solutions. Just put your values in the excel document to get your answers.**

Question 1

Compute the cost of not taking the following cash discounts. (Use a 360-day year. Do not round intermediate calculations. Input your final answers as a percent rounded to 2 decimal places.)

Question 2

A pawnshop will lend $4,500 for 45 days at a cost of $35 interest.

What is the effective rate of interest? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Question 3

Mary Ott is going to borrow $10,300 for 60 days and pay $231 interest.

What is the effective rate of interest if the loan is discounted? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Question 4

Dr. Ruth is going to borrow $5,000 to help write a book. The loan is for one year and the money can either be borrowed at the prime rate or the LIBOR rate. Assume the prime rate is 6 percent and LIBOR 1.5 percent less. Also assume there will be a $40 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 What is the dollar cost of the loan? (Use a 360-day year. Do not round intermediate calculations and round your final answer to 2 decimal places.)

? (Use a 360-day year. Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. Which loan has the lower effective interest cost?

Question 5

Talmud Book Company borrows $24,200 for 60 days at 15 percent interest.

What is the dollar cost of the loan? (Use a 360-day year. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Question 6

McGriff Dog Food Company normally takes 23 days to pay for average daily credit purchases of $9,590. Its average daily sales are $10,720, and it collects accounts in 29 days.

a. What is its net credit position?

b-1. If the firm extends its average payment period from 23 days to 35 days (and all else remains the same), what is the firm's new net credit position? (Negative amount should be indicated by a minus sign.)

b-2. Has the firm improved its cash flow?

Question 7

Carey Company is borrowing $175,000 for one year at 8.5 percent from Second Intrastate Bank. The bank requires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).

a. What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

b. What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

Question 8

Your company plans to borrow $12 million for 12 months, and your banker gives you a stated rate of 21 percent interest.

Calculate the effective rate of interest for the following types of loans.

a. Simple 21 percent interest with a compensating balance of 12 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.)

**BUSI 320 Connect Homework 4 Liberty University Complete Answer**

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