Aig requires an additional 50 million in cash to pay

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AIG needs an additional $50 million in cash to pay retention bonuses to key corporate executives. It takes out a one year loan with a 20% compensating balance. The stated rate of interest is 9%. The loan will be repaid in 12 monthly installments. (a) How much should AIG actually borrow to meet its cash needs? (b) What will AIG's monthly payment be? (c) Is 9% AIG's "true cost" of borrowed funds?

Reference no: EM13477769

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