Calculate the effective rate of interest for types of loans

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Reference no: EM131976796

Your company plans to borrow $5 million for 12 months, and your banker gives you a stated rate of 17 percent interest.

Calculate the effective rate of interest for the following types of loans.

a. Simple 17 percent interest with a compensating balance of 8 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.)

c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.)

d. Discounted interest with a compensating balance of 4 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM131976796

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