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8_murik_8 [283]
3 years ago
9

Come and Go Bank offers your firm a discount interest loan with an interest rate of 9 percent for up to $21 million, and in addi

tion requires you to maintain a 2 percent compensating balance against the face amount borrowed.
What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Effective annual rate= %
Business
1 answer:
Evgesh-ka [11]3 years ago
7 0

Answer: 10.11%

Explanation:

The effective annual interest rate on this lending arrangement will be calculated thus:

Interest Paid will be:

= 9% × $21 million

= 0.09 × $21 million

= $1.89 million

Amount Received will then be:

= (21million - 1.89million) - (21million)(0.02)

= $19.11 million - $0.42 million

= $18.69 million

Then, the effective annual rate will be:

= 1.89/18.69

= 10.11%

Therefore, the effective annual interest rate on this lending arrangement is 10.11%.

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How do you find what number to multiply/divide to find equivalent fractions??? The only strategy i know if cross multiplication
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Answer:

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