Ratios Business

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PROBLEMS

1. The following three one year “discount” loans are available to you:

Loan A: $120,000 at a 7 percent discount rate
Loan B: $110,000 at a 6 percent discount rate
Loan C: $130,000 at a 6.5 percent discount rate

a. Determine the dollar amount of interest you would pay on each loan and indicate the amount of net proceeds each loan would provide. Which loan would provide you with the most upfront money when the loan takes place?

Loan A:

120,000 – 8400 = 111,600.

Loan B:
110,000 - 6600 =103,400

Loan C:
130,000 – 8450 = 121,550

The loan that would give more upfront is Loan C.

b. Calculate the percent interest rate or effective cots of each loan. Which one ha the lowest cost?

Loan A: 8400 X 100 = 7.53%

Loan B: 6600 X 100 = 6.38%

Loan C: 8450 X100 =6.95%

The loan that would be at lowest cost is Loan B.

2. ATM Banc has the following liabilities and equity categories:
Deposits $9 Million
Other Liabilities $4 Million
Owner’s Capital ? Total Liabilities and capital ? a. What would be the bank’s total liabilities and capital if owners’ capital were half the size of other liabilities?
Deposits – 9 million
Other Liabilities – 4 million
Owners’ Capital - 2 million
TOTAL LIABILITIES AND CAPITAL = 15 Million

b. If total liabilities and capital were $15.5 million, what would be the amount of the owners’ capital?
Deposits – 9 million
Other Liabilities – 4 million
OWNERS CAPITAL – 2.5 million
Total Liabilities and Capital – 15. 5 Million

c. If the total liabilities and capital were $14 million, and $1 million of deposits were withdrawn from the bank, what would be the amount of the owners’ capital?
Deposits – 9 million – 1 million = 8 million
Other liabilities = 4 million
OWNERS CAPITAL – 2 Million
Total Liabilities and Capital – 14 million

PROBLEMS CHP 4

1. A new bank has vault cash

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