Your business requests a 3-month loan for \( \$ 500,000 \). What will be the interest paid at the end of the term if the business risk percentage is assessed at \( 2.2 \% \) and LIBOR is at \( 1.8 \% \) ? Interest Paid \( =\$[?] \) Round to the nearest hundredth.
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To calculate the interest paid at the end of the loan term, you first need to determine the total interest rate by adding the business risk percentage to the LIBOR rate. Total Interest Rate = Business Risk Percentage + LIBOR Total Interest Rate = 2.2% + 1.8% = 4.0% Next, convert the percentage to a decimal for calculation purposes, which means 4.0% as a decimal is 0.04. Now, use the formula for simple interest: Interest Paid = Principal × Rate × Time Interest Paid = \( \$ 500,000 \) × 0.04 × \( \frac{3}{12} \) Interest Paid = \( \$ 500,000 \) × 0.04 × 0.25 Interest Paid = \( \$ 500,000 \) × 0.01 Interest Paid = \( \$ 5,000 \) Thus, the interest paid at the end of the term will be \( \$ 5,000.00 \).