In exchange for a $ 4 0 0 million fixed commitment line of credit, your firm has
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Question:
In exchange for a $ million fixed commitment line of credit, your firm has agreed to do the following:
Pay percent per quarter on any funds actually borrowed.
Maintain a percent compensating balance on any funds actually borrowed.
Pay an upfront commitment fee of percent of the amount of the line.
Based on this information, answer the following:
Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to decimal places, eg
Suppose your firm immediately uses $ million of the line and pays it off in one year. What is the effective annual interest rate on this $ million loan?
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