Question: 1. Berfin Corp. is able to borrow up to $50 million from its line of credit at any time. The interest rate is 3% per

1. Berfin Corp. is able to borrow up to $50 million from its line of credit at any time. The interest rate is 3% per quarter and the company if required to maintain a compensating balance of 4% on any funds actually borrowed which will be deposited in a non-interest bearing account. Assume the bank uses compound interest on its line of credit loans. a. What is the effective annual interest rate on this lending arrangement? b. Suppose the company needs $30 million today and plans to repay it in one year. How much interest it needs to pay? 4% of compensating balance on any funds actually borrowed is still required

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