your business requests a 3 - month loan for $550,000. what will be the interest paid at the end of the term…

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.

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:

$6875.00$