Question

Assume that a firm has a $1,000,000 line of credit at an 8.75 percent rate of interest that requires a 17.0 percent compensating balance. If the firm borrowed $277,000 for 1 year, calculate annual effective rate of interest. Round the answer to two decimal places.

Name: assume that a firm has a 1000000 line of credit at an 875 percent rate of interest that requires a 170 percent compensating balance if the firm borrowed 277000 for 1 year calculate annual ef 64083
Uploaded: 2023-08-03T03:25:37-08:00
Duration: 2 min 13 s
Channel: Narayan Hari
Description: assume that a firm has a 1000000 line of credit at an 875 percent rate of interest that requires a 170 percent compensating balance if the firm borrowed 277000 for 1 year calculate annual ef 64083

          Assume that a firm has a $1,000,000 line of credit at an 8.75 percent rate of interest that requires a 17.0 percent compensating balance. If the firm borrowed $277,000 for 1 year, calculate annual effective rate of interest. Round the answer to two decimal places.

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Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Narayan Hari

08/03/2023

Step 1

The compensating balance is 17.0% of the total line of credit. Compensating balance = 17.0% of $1,000,000 Compensating balance = 0.17 × $1,000,000 = $170,000 Show more…

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Assume that a firm has a $1,000,000 line of credit at an 8.75 percent rate of interest that requires a 17.0 percent compensating balance. If the firm borrowed $277,000 for 1 year, calculate annual effective rate of interest. Round the answer to two decimal places.