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Bank APR Number of Times Compounded National Fir...

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Bank APR Number of Times Compounded National First Prime Rate + 6.75% Semiannually Regions Best 13.17 Monthly 1. Assuming that AirJet Parts, Inc. is considering loans from National First and Regions Best, what are the EARs for these two banks? Hint for National Bank: Go to the St. Louis Federal Reserve Board?s website (http://research.stlouisfed.org/fred2/). Select ?Interest Rates? and then ?Prime Bank Loan Rate?. Use the latest MPRIME. Show your calculations. (15 pts) please let me know if iam doing this answer right EAR for National First: (1+0.10/6) ^6-1= 0.1042 or 10.42% EAR EAR for Regions Best (1+0.1317/12) ^12-1= 0.1399 or 13.99% EAR,Based on your calculations above, which of the two banks would you recommend and why? Explain your rationale. Please describe in detail. Answer from previous question was: Effective rate of Prime rate: [(1+ 0.0325/12)^12] ? 1 ? 3.30% Effective rate of 6.75% with semi-annual compounding: [(1+ .0675/2)^2] -1 ? 6.864% EAR of National First Bank = 3.30% + 6.864% ? 10.164% (or) 10.2% Regions Best: APR = 13.17 Compounded Monthly EAR = [(1+ .1317/12)^12] ? 1 ? 13.99% (or) 14%

 

Paper#8817 | Written in 18-Jul-2015

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