The study investigated the effect of cost of governance on economic growth in democratic dispensation in Nigeria. The variables of cost of governance are broken into general administration, defense, internal security and national assembly and used as
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University of San Jose Recoletos College of Commerce Management Advisory Services III J.Echivarria 1. Sheer Company received a line of credit from its bank. The interest rate is 15%, which is to be deducted in advance. The line of credit agreement requires that an amount equal to a fifth of the loan be deposited in to a compensating balance account. The company took advantage of the entire usable amount of the loan and received the proceeds of P780,000. How much is the principal amount of the loan? 2. Wewe Company was given a P800,000 line of credit from Popo Bank. The stated interest rate is 12%. Compute the cost of credit under the following independent circumstances: a. The bank requires a compensating balance of 10% and the Company takes the entire usable amount under a regular loan agreement. The Company does not usually maintain accounts with the bank. b. The bank requires a compensating balance of 15% and the company takes only 50% of the credit line amount. The company has an existing account with the bank with a balance of P20,000. c. The company takes 80% of the credit line and is required to maintain a compensating balance which is 25% of net proceeds. This is the first time that the Company is transacting with the bank. d. The Company takes advantage of the entire credit line but has to maintain a 20% compensating balance? The loan is in a discounted arrangement. e. The entire available credit is taken by the company through a discounted loan agreement. The bank has an existing account with the bank which should be used for the 10% compensating balance requirement. The account has a current balance of P10,000. f. The company takes only one-fourth of the credit line and has to maintain a compensating balance which is equivalent to 10% of the net proceeds of the discounted loan. The company does not have any previous transactions with the bank. g. The credit line is a revolving credit line that bears a commitment fee rate of 4%. The company loaned P550,000 from the bank. h. The credit line is a revolving credit line that bears a commitment fee rate of 1%. The company had a discounted loan of P300,000 from the bank. The required compensating balance is 5%. The company has no existing account with the bank. i. The credit line is a revolving credit line that bears a commitment fee rate of 10%. The company loaned 90% of the credit line amount with no required compensating balance. The loan is discounted.
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j.
The loan is a discounted loan. The net proceeds of the loan is P500,000. The compensating balance is 20% of the net proceeds. The company has no existing account with the bank.
3. RM Corporation has the following credit terms with its suppliers: Compute the cost of credit for each supplier Supplier Andy Mark Ryan Filjun Anthony Clark Georel Juls Darlon
Credit Terms 2/10 net 50 3/5 net 30 2/20 net 60 3/10 net 30 3/15 net 40 2/30 net 60 1/10 net 15 2/15 net 30 5/5 net 30
Additional Data: Filjun was paid 7 days after the term of the credit ended. Darlon was paid within the discount period. The payment for Andy was made on the day after the discount period lapsed. Clark was paid 5 days after the discount period. Juls was paid 30 days after the credit term. Ryan was paid on the 20th day of the credit term. 4. A company obtained a short term bank loan to finance a financial need of P600,000. The annual interest rate is 10%. The bank requires that a compensating balance of 20% of the net proceeds is to be maintained in the borrower’s account. Even before the approval of the loan, the company has been maintaining a balance of P50,000 in the account. Requirements: a) Determine the principal of the loan. b) Determine the effective rate of interest.
