Suppose you borrow 2,500,000 from a bank for one-half year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial load value. What is the effective annual interest rate are you being charged?

Answer rating: 100% (QA)

To calculate the effective annual interest rate charged on the discounted loan we need to consider t... View the full answer