Question: Paymaster Enterprises has arranged to finance its seasonal working capital
Paymaster Enterprises has arranged to finance its seasonal working- capital needs with a short- term bank loan. The loan will carry a rate of 12 percent per an-num with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $ 100,000 for a period of 3 months, what is the cost of the bank loan?
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