Calculate the effective annual rate of borrowing

Assignment Help Finance Basics

Reference no: EM1353728

Company X has a line of credit at Bank A that requires it to pay 11% interest on its borrowing and to maintain a compensating balance equal to 15% of the amount borrowed. The company has borrowed $800,000 during the year under the agreement. Calculate the effective annual rate on the company's borrowing in each of the following circumstances:

a) The company normally maintains no deposit balances at Bank A.

b) The company normally maintains $70,000 in deposit balances at Bank A.

c) The company normally maintains $150,000 in deposit balances at Bank A.

d) Compare, contrast, and discuss your findings in parts a, b, and c.

Reference no: EM1353728

Questions Cloud

Layers and functions of organizational culture : Show the layers and functions of organizational culture and the types of organizational culture and their associated characteristics

Define the culture at southwest airlines : Describe the artifacts that define the culture at Southwest Airlines - Describe the artifacts you find or recall that define the culture.

Comprises a final conclusion on projected future industry : Comprises a final conclusion on projected future industry performance based on your findings

Culture of african americans and cultures of latin america : Compare similarities and differences of culture of African Americans and the cultures of Latin America.

Calculate the effective annual rate of borrowing : Corporation X has a line of credit at Bank A that requires it to pay 11 percent interest on its borrowing and to maintain a compensating balance equal to 15 percent of the amount borrowed.

What would you say to your former colleague : What examples can you give of preparing and managing potential conflicts that result from change

Determine effective rate of payment : Commercial paper is usually sold at a discount. Company A has just sold an issue of ninety day commercial paper with a face value of 1 million dollar.

What is the magnitude of the force on the bead : A 72 kg man stands on a spring scale in an elevator. Starting from rest, elevator ascends, attaining its maximum speed of 1.20 m/s in 0.80 s.

Culture-specific personality traits : Give a description of two universal and two culture-specific personality traits.

User Account

All Pages