Meals for the Homeless usually experiences seasonality in its cash balances. In December, contributions from donors increase

Question:

Meals for the Homeless usually experiences seasonality in its cash balances. In December, contributions from donors increase its cash balances, and then these balances are used throughout the following year. By the fall, Meals for the Homeless has a tight cash flow. It has a with its bank, which allows it to draw up to $500,000 at 7 percent interest per year. During 2013, Meals for the Homeless draws down $135,000 on October 1 and repays it at the start of business on January 3, 2014—exactly 94 days later. How much should it pay back on January 3, and how much of that is interest?

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...