Question

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 2.18 percent and a minimum of 1.79 percent. Calculate the rate of interest for weeks 2 through 10.

Week 1	1.89​%
Week 2	1.65​%
Week 3	1.53​%
Week 4	1.36​%
Week 5	1.65​%
Week 6	1.66​%
Week 7	1.68​%
Week 8	1.93​%
Week 9	1.92​%

The rate of interest for week 2 is ___% round to two decimal places

Answer 1

LIBOR + 0.25% is calculated. Then, if the loan interest rate is higher than 2.18%, it should be reduced to 2.18% and if the loan interest rate is lower than 1.79%, it should be increased to 1.79%. This happens in weeks 3 and 4.