A company’s bank requires a compensating balance of 20% on a $100,000 loan. If the stated interest on the loan is 7%, what is the effective cost of the loan?
Question
Solution 1
To calculate the effective cost of the loan, we need to consider the compensating balance requirement.
Step 1: Calculate the compensating balance amount The compensating balance is 20% of the loan amount, which is $100,000. Compensating balance = 20% * $100,000 = $20,000
Step 2: Calculate the ac Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study prob
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