Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensating balance.
Question:
a. How much must you borrow in order to obtain $250,000 in usable funds? Assume you currently do not have any funds on deposit at the bank. What is the effective annual rate on a six-month loan?
b. How much must you borrow in order to obtain $250,000 in usable funds if you currently have $10,000 on deposit at the bank? What is the effective annual rate on a six-month loan?
c. How much must you borrow in order to obtain $250,000 in usable funds if you currently have $30,000 on deposit at the bank? What is the effective annual rate on a six-month loan?
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Step by Step Answer:
a For a 6month loan you must borrow 2500001 10 27777778 At 10 ...View the full answer
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Related Book For 
Introduction to Finance Markets Investments and Financial Management
ISBN: 978-1118492673
15th edition
Authors: Melicher Ronald, Norton Edgar
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