your business requests a 3 - month loan for $...
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 2.2% and libor is at 2.8%? interest paid = $? round to the nearest hundredth.
Answer
# Explanation:
## Step1: Calculate the annual - interest rate
The annual - interest rate $r$ is the sum of the business risk percentage and the LIBOR rate. So, $r=(2.2 + 2.8)\%=5\%=0.05$.
## Step2: Calculate the time in years
The loan term is 3 months. Since there are 12 months in a year, $t=\frac{3}{12}=0.25$ years.
## Step3: Calculate the interest
The simple - interest formula is $I = P\times r\times t$, where $P = 550000$, $r = 0.05$, and $t = 0.25$. So, $I=550000\times0.05\times0.25$.
$I = 550000\times0.0125=6875$.
# Answer:
$6875.00$