Question

Suppose a rancher wants to borrow $163,835.00 to buy a tract of land. The BCS Bank will make a 26-year loan fully amortized at 10.84% (annual payments). A $476.00 loan fee and stock purchase are required. The borrower stock requirement is the lesser of $1,000 or 4.00% of the loan amount.

What is the borrower's stock requirement?

a) $1,000
b) $6,553.40
c) $4,000
d) $6,553.60

Answer 1

inal answer:

a) $1,000. The borrower's stock requirement is the lesser of $1,000 or 4% of the loan amount. After calculating 4% of the loan amount as $6,553.40, we determine that the stock requirement is $1,000 since it is the lesser amount.

Step-by-step explanation:

The question is asking to calculate the borrower's stock requirement when applying for a loan to purchase a tract of land. According to the information provided, the stock requirement is the lesser of $1,000 or 4% of the loan amount. First, we must find 4% of the loan amount, which is $163,835.00.

4% of $163,835.00 is calculated by 0.04 × $163,835.00, which equals $6,553.40. Since the stock requirement is the lesser of $1,000 or this value, the borrower's stock requirement would be $1,000. Therefore, the correct answer to what the borrower's stock requirement would be is option a) $1,000.