Michael’s Computers’ local bank offers the firm a 12-month revolving credit agreement of $500,000. The APR of the revolver is 12 percent with a commitment fee of 0.5% on the unused portion. Over the course of a year, Michael’s chief financial officer believes they will have an average balance of $280,000 on the revolving credit agreement, with a low of $50,000 and a high of $450,000. What is the annual effective cost of this proposed agreement?
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