Hi - you need to calculate the interest paid or earned by month at the beginning balance of each period
the interest is calculated as following
Jan Beg. Balance. 2m X 1/12 x4% = 6,666.7
Feb. Beg. Balance. 4m x 1/12 x4% = $13,333.3
Mar.
Beg. Balance. 5
m x 1/12 x4% = $16,666.7
Apr.
Beg. Balance. = 0
May. Beg bal. (3m) x 1/12x 8%=$ (20,000)
jun. Beg bal. (5m) x 1/12 x 8%= $(33,333.3)
Total $16,666,7
as mentioned in the question approximately then the answer is $16,000
thx
Fawaz,
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Fawaz Alhamad
Director/Manager
Qatif
Saudi Arabia
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Original Message:
Sent: 01-25-2022 11:18 AM
From: Meenakshi Ramakrishnan
Subject: CMA Practice Question
Can Someone help me how to approach this question?
Mandel Inc. has a zero-balance account with a commercial bank. The bank sweeps any excess cash into a commercial investment account earning interest at the rate of 4% per year, payable monthly. When Mandel has a cash deficit, a line of credit is used which has an interest rate of 8% per year, payable monthly based on the amount used. Mandel expects to have a $2 million cash balance on January 1 of next year. Net cash flows for the first half of the year, excluding the effects of interest received or paid, are forecasted (in millions of dollars) as follows.
Jan Feb Mar Apr May Jun Net cash inflows ($) +2 +1 -5 -3 -2 +6
Assuming all cash-flows occur at the end of each month, approximately how much interest will Mandel incur for this period?
$17,000 net interest paid.
$53,000 net interest paid.
$76,000 net interest paid.
$195,000 net interest paid.
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Meenakshi Ramakrishnan
Student
Chennai TN
India
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