Question

Coronado Company borrowed $1,018,620 on March 1 on a 5-year, 12% note to help finance construction of the building. In addition, the company had outstanding all year a 10%, 5-year, $2,005,300 note payable and an 11%, 4-year, $3,444,000 note payable. Compute the weighted-average interest rate used for interest capitalization purposes. (Round answer to 2 decimal places, e.g. 7.58%.)

Answer 1

weighted-average interest rate =10.8%

Step-by-step explanation:

The weighted average interest rate is the average interest rate of all of the Notes weighted using the nominal value of the notes.

Total nominal value = 1,018,620 + 2,005,300 + $3,444,000 = 6,467,920.

Weighted average interest rate

= (1,018,620× 12%) + (10%×2,005,300)+(11%×3,444,000 )/6,467,920.

= 10.8%

weighted-average interest rate =10.8%