Your business requests a 3-month loan for \( \$ 550,000 \). What will be the interest paid at the end of the term if the business risk percentage is assessed at \( 2.0 \% \) and LIBOR is at \( 2.1 \% \) ? Interest Paid \( =\$[?] \) Round to the nearest hundredth.
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To calculate the interest paid at the end of the term, we need to first determine the total interest rate applicable for the loan. This total interest rate is the sum of the business risk percentage and the LIBOR rate: Total Interest Rate = Business Risk Percentage + LIBOR Total Interest Rate = 2.0% + 2.1% = 4.1% Next, we convert that percentage to a decimal for calculation: Total Interest Rate (as a decimal) = 4.1 / 100 = 0.041 Now, calculate the interest paid using the formula: Interest Paid = Principal × Total Interest Rate × Time Since the loan is for 3 months, we need to express that in years: Time = 3 months = 3/12 = 0.25 years Interest Paid = \$550,000 × 0.041 × 0.25 Interest Paid = \$550,000 × 0.01025 Interest Paid = \$5,637.50 Therefore, the interest paid at the end of the term is \( \$5,637.50 \).
