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19 April, 16:38

Gibraltar Construction was granted a 1-year construction loan of $650,000 to finance the construction of an apartment complex. Gibraltar borrowed the money from Citizens Trust at an interest rate of 0.75% ordinary interest over the prime rate. What was the maturity value of the loan if the prime rate is 8.75%?

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  1. 19 April, 19:08
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    Given:

    loan: 650,000

    prime rate: 8.75%

    interest rate of 0.75% ordinary interest over the prime rate

    Interest rate: 8.75% + 0.75% = 9.5%

    650,000 x 9.5% x 1 = 61,750 interest

    maturity value: 650,000 + 61,750 = 711,750
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