What advantages do compensating balances have for banks? Are the advantages to banks necessarily disadvantages to corporate borrowers?
Answer to relevant QuestionsWhat are the advantages of commercial paper in comparison with bank borrowing at the prime rate? What is a disadvantage?Your bank will lend you $4,000 for 45 days at a cost of $50 interest. What is your effective rate of interest?McGriff Dog Food Company normally takes 27 days to pay for average daily credit purchases of $9,530. Its average daily sales are $10,680, and it collects accounts in 32 days.a. What is its net credit position? That is, ...Zerox Copying Company plans to borrow $172,000. New Jersey National Bank will lend the money at one-half percentage point over the prime rate at the time of 17½ percent (18 percent total) and requires a compensating balance ...The treasurer for Pittsburgh Iron Works wishes to use financial futures to hedge her interest rate exposure. She will sell five Treasury futures contracts at $138,000 per contract. It is July and the contracts must be closed ...
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