Shane's Music Has a Line of Credit with a Local

question 54

Multiple Choice

Shane's Music has a line of credit with a local bank that permits it to borrow up to $750,000 at any time.The interest rate is 0.28 percent per month.The bank charges compound interest and also requires that 4 percent of the amount borrowed be deposited into a non-interest-bearing account.How much interest will the firm pay if it needs $500,000 of cash for four months to pay its operating expenses?

• A)$5,857.88
• B)$5,949.21
• C)$6,017.02
• D)$6,039.91
• E)$6,208.11

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Definitions:

Shares Outstanding

The total number of shares that are currently owned by shareholders, including restricted shares owned by the company's officers and insiders as well as those held by the public.

Market Price

The market price at which you can currently buy or sell an asset or service.

Cash Deal

A transaction where the payment for a good, service, or acquisition is made entirely with cash instead of financing or stock exchanges.

Fair Market Value

The price at which an asset would trade in a competitive auction setting, reflecting the value of an asset in the open market.