Question: 12 In exchange for a $1 million fixed commitment line of credit, a firm has agreed to do the following: 1. Pay 0.5% per month

12 In exchange for a $1 million fixed commitment line of

12 In exchange for a $1 million fixed commitment line of credit, a firm has agreed to do the following: 1. Pay 0.5% per month on any funds actually borrowed. 2. Maintain a 4% compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.2% of the unused amount of the line. Assume the firm immediately borrows $800,000 from the line to use for 1 year. What is the EAR on this $800,000? (Round your answer to 2 decimal places. Do not round intermediate calulations. Do not include % sign in your answer.) 6 points

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