Your company has arranged a revolving credit agreement for up to $78 million at an interest rate
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Question:
Your company has arranged a revolving credit agreement for up to $78 million at an interest rate of 1.47 percent per quarter. The agreement also requires your company to maintain a compensating balance of 4 percent of the unused portion of the credit line, to be deposited in a non-interest bearing account. Your company's short-term investment account at the same bank pays an interest rate of 0.61 per quarter. What is the effective annual interest rate if your company borrows $43 million for one year?
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
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