The Dade Company is borrowing $300,000 for one year and paying $27,000 in interest to Miami National
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The Dade Company is borrowing $300,000 for one year and paying $27,000 in interest to Miami National Bank. The bank requires a 20 percent compensating balance. What is the effective rate of interest? What would be the effective rate if the company were required to make 12 monthly payments to retire the loan? The principal, as used in Formula 8-6 on page 232, refers to funds the firm can effectively utilize (Amount borrowed - Compensating balance).
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Related Book For 
Foundations of Financial Management
ISBN: 978-0077454432
14th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
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