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allsm [11]
3 years ago
14

​Crawley, Inc. has a line of credit with HNC Bank that allows the company to borrow up to​ $800,000 at an interest rate of 12 pe

rcent.​ However, Crawley, Inc. must keep a compensating balance of 18 percent of any amount borrowed on deposit at the bank.​ Crawley, Inc. does not normally keep a cash balance account with HNC Bank. What is the effective annual cost of​ credit?
Business
1 answer:
ch4aika [34]3 years ago
7 0

Answer: 14.63%

Explanation:

Based on the information given in the question, the effective annual cost of​ credit will be calculated as:

Effective annual cost of credit = [Interest rate/ (100 - Deposit Rate)] x 100

= [12 /(100 - 18)] x 100

= (12 / 82) × 100

= 0.1463 × 100

= 14.63%

The effective annual cost of​ credit is 14.63%.

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<h3>What is an exchange gain or loss?</h3>
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