Cash Management - Overdraft Question

Mollypod88
Mollypod88 Registered Posts: 155 Beyond epic contributor 🧙‍♂️
Hi All,

I have a question regarding overdraft facilities please can somebody explain how to get the answer:

"The bank is also offering a overdraft facility of £19500 which attracts an annual interest rate of 12%. The partners believe that they will require an average overdraft of £16,000 for 8 months of the first year"

Answer = £1280

How do I get to this answer?

Many thanks!

Comments

  • Richard
    Richard Registered Posts: 373 Dedicated contributor 🦉
    £16,000 x 12% = £1,920 charge for the year, however, they only expect to need it for 8 months so £1,920 x 8/12 = £1,280
  • Mollypod88
    Mollypod88 Registered Posts: 155 Beyond epic contributor 🧙‍♂️
    Thank you!
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