Question: You borrow $244,444 and the compensating balance requirement is only $24,444. Since you have $30,000 on deposit at the bank, you can withdraw $30,000 -

You borrow $244,444 and the compensating balance requirement is only $24,444. Since you have $30,000 on deposit at the bank, you can withdraw $30,000 - $24,444 = $5,556. The total usable funds obtained is $244,444 + $5,556 = $250,000.

What is the effective annual rate on a six month loan?

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