On the June 12 interest payment date, the outstanding balance on Delta Nurseries’ revolving loan was $65,000. The floating interest rate on the loan stood at 9.25% on June 12, but rose to 9.5% on July 3, and to 10% in July 29. If Delta made principal payments of $10,000 on June 30 and July 31, what were the interest charges to its bank account on July 12 and August 12? Present a repayment schedule supporting the calculations.
To calculate the interest charges on July 12 and August 12, we first need to construct a repayment schedule. Let's break down the timeline and calculate the remaining balance, interest charges, and principal payments for each period.
1. June 12: Outstanding balance is $65,000 at an interest rate of 9.25%.
- Interest charged on June 12 = $65,000 * 9.25% = $6,012.50
- Principal payment made on June 30 = $10,000
- Remaining balance after June 30 = $65,000 - $10,000 = $55,000
2. July 3: The interest rate rises to 9.5%.
- Interest charged on July 12 = $55,000 * 9.5% = $5,225
- Principal payment made on July 31 = $10,000
- Remaining balance after July 31 = $55,000 - $10,000 = $45,000
3. July 29: The interest rate rises again to 10%.
- Interest charged on August 12 = $45,000 * 10% = $4,500
- No principal payment is made after July 31, so the remaining balance remains $45,000.
Now let's summarize the repayment schedule:
Date | Outstanding Balance | Interest Charged | Principal Payment | Principal Balance
------------------------------------------------------------------------------------------
June 12 | $65,000 | $6,012.50 | - | -
June 30 | $55,000 | - | $10,000 | $45,000
July 3 | $55,000 | $5,225 | - | -
July 31 | $45,000 | - | $10,000 | $35,000
July 29 | $45,000 | $4,500 | - | -
August 12 | $45,000 | $4,500 | - | -
Therefore, the interest charges on July 12 were $5,225 and the interest charges on August 12 were $4,500.
To calculate the interest charges on July 12 and August 12, we first need to construct a repayment schedule based on the given information.
Repayment Schedule:
1. June 12:
Outstanding Balance: $65,000
Interest Charge: $65,000 * 9.25%
Principal Payment: $0
New Outstanding Balance: $65,000 + Interest Charge - Principal Payment
2. June 30:
Outstanding Balance: New Outstanding Balance from June 12
Interest Charge: Outstanding Balance * 9.25%
Principal Payment: $10,000
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
3. July 3:
Outstanding Balance: New Outstanding Balance from June 30
Interest Rate: 9.5%
Interest Charge: Outstanding Balance * Interest Rate
Principal Payment: $0
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
4. July 12:
Outstanding Balance: New Outstanding Balance from July 3
Interest Charge: Outstanding Balance * 9.5%
Principal Payment: $0
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
5. July 29:
Outstanding Balance: New Outstanding Balance from July 12
Interest Rate: 10%
Interest Charge: Outstanding Balance * Interest Rate
Principal Payment: $0
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
6. July 31:
Outstanding Balance: New Outstanding Balance from July 29
Interest Charge: Outstanding Balance * 10%
Principal Payment: $10,000
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
7. August 12:
Outstanding Balance: New Outstanding Balance from July 31
Interest Charge: Outstanding Balance * 10%
Principal Payment: $0
New Outstanding Balance: Outstanding Balance + Interest Charge - Principal Payment
Now, let's calculate the interest charges on July 12 and August 12:
July 12:
Outstanding Balance: $65,000
Interest Charge: $65,000 * 9.5%
August 12:
Outstanding Balance: New Outstanding Balance from July 31
Interest Charge: Outstanding Balance * 10%
Please provide the new outstanding balance from July 31, and I can calculate the interest charge on August 12 for you.