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Estimating the cost of bank credit Paymaster Enterprises has arranged to finance its seasonal working capital needs with a short term bank loan The loan will carry a rate of 8 percent per annum

(Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will carry a rate of 8 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $1 million for a period of 6 months, what is the cost of the bank loan?

Apr 27 2020 View more View Less

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