A firm engaged a one-year, monthly pay, $100,000 line of credit at 6 percent plus a 0.25 percent commitment fee on the unused portion of the line. The firm used 80 percent of the line for the first half year and reduced the loan amount to 40 percent for the rest of the year. What is the effective annual rate of the loan?
Answer to relevant QuestionsWhat are secondary market transactions? How do secondary markets facilitate the primary markets?List the basic areas of capital budgeting.Summarize the main responsibilities of the finance function (including CFO, treasurer, and controller) in a non-financial company.Calculate the effective annual cost of a one-year $2-million operating line of credit. The firm borrowed $1.2 million for the first five months of the year and reduced the loan amount to $500,000 for the rest of the year. ...What are some of the disadvantages of carrying inventories?
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