The Bensington Glass Company entered into a loan agreement with the firm's bank to finance the firm's working capital. The loan called for a floating rate that was 25 basis points (0.25 percent) over an index based on LIBOR. In addition, the loan adjusted weekly based on the closing value of the index for the previous week and had a maximum annual rate of 2.24 percent and a minimum of 1.71 percent. Calculate the rate of interest for weeks 2 through 10.

As the data in incomplete, lets consider the data found on the net for the same question

DATE         LIBOR

week 1        1.98%

week 2       1.64%

week 3       1.54%

week 4       1.31%

week 5       1.57%

week 6       1.69%

week 7       1.66%

week 8       1.94%

week 9       1.92%

(This data in not given in the question. If some values differ from this data, just change the that value in the method below and you'll get your answer)

Floating rate = 0.25%

Maximum rate = 2.24%

Minimum rate = 1.71%

General formula for for finding rate of interest of a week

Week Rate = Previous Week's Rate (LIBOR from table) + Floating Rate

Lets find the values:

Week 2 rate  = Week 1 rate + 0.25%   = 1.98% + 0.25% = 2.23%

Week 3 rate  = Week 2 rate + 0.25%  = 1.64% + 0.25% = 1.89%

Week 4 rate  = Week 3 rate + 0.25%  = 1.54% + 0.25% = 1.79%

Week 5 rate  = Week 4 rate + 0.25%  = 1.31% + 0.25% = 1.56%

Week 5 rate is lower than the minimum rate, rate of Week 5 can be taken as minimum rate

Week 5 rate = 1.71%

Week 6 rate  = Week 5 rate + 0.25%  = 1.57% + 0.25% = 1.82%

Week 7 rate  = Week 6 rate + 0.25%  = 1.69% + 0.25% = 1.94%

Week 8 rate  = Week 7 rate + 0.25%  = 1.66% + 0.25% = 1.91%

Week 9 rate  = Week 8 rate + 0.25%  = 1.94% + 0.25% = 2.19%

Week 10 rate = Week 9 rate + 0.25%  = 1.92% + 0.25% = 2.17%

answeraccounts;