A company has a $10,000 line of credit with a bank. The line of credit calls for

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A company has a $10,000 line of credit with a bank. The line of credit calls for an interest rate of 10 percent and a compensating balance of 5 percent. This firm needs $5,000 of fund to pay for the inventory.

a) How much does the firm need to borrow from the bank?

b) What is the effective interest rate if the firm uses this line of credit with the compensating balance?

Related Book For answer-question

Managerial Accounting Creating Value in a Dynamic Business Environment

ISBN: 978-0078025662

10th edition

Authors: Ronald Hilton, David Platt

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Posted Date: Sep 08, 2023 12:39 AM

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A company has a $10,000 line of credit with a bank. The line of credit calls for

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Managerial Accounting Creating Value in a Dynamic Business Environment

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