Colson Company has a line of credit with Federal Bank. Colson can...
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Colson Company has a line of credit with Federal Bank. Colson can borrow up to $ at any time over the course of the calendar year. The following table shows the prime rate expressed as an annual percentage along with the amounts borrowed and repaid during the first four months of the year. Colson agreed to pay interest at an annual rate equal to percent above the banks prime rate. Funds are borrowed or repaid on the first day of each month. Interest is payable in cash on the last day of the month. The interest rate is applied to the outstanding monthly balance. For example, Colson pays percent percent percent annual interest on $ for the month of January.
Month Amount Borrowed
or Repaid Prime Rate for
the Month
January $
February
March
April
Required
Compute the amount of interest that Colson will pay on the line of credit for the first four months of the year.
Compute the amount of Colson's liability at the end of each of the first four months.
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