your business requests a 3 - month loan for $500,000. what will be the interest paid at the end of the term…

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.

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.

Answer

Explanation:

Step1: Calculate the interest - rate

The total interest rate is the sum of the business risk percentage and LIBOR. So the interest rate $r=(2.2% + 1.8%)=4%=0.04$.

Step2: Adjust for the time - period

The loan is for 3 months. Since there are 12 months in a year, the time $t=\frac{3}{12}=0.25$ years.

Step3: Calculate the interest paid

The simple - interest formula is $I = P\times r\times t$, where $P = 500000$, $r = 0.04$, and $t = 0.25$. So $I=500000\times0.04\times0.25$. $I = 500000\times0.01=5000$.

Answer:

$5000.00$