Compensating balance versus discount loan automotive

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Reference no: EM133674510

Question

Compensating balance versus discount loan Automotive Accessories needs to bor- row $135,000 for 6 months for renovations. It is considering two financing options: Bank Helping Hand offers an 8% annual rate subject to a 10% compensating bal- ance. Bank Friendly Financer offers the funds as a discount loan with an annual rate of 8%. Automotive Accessories maintains no deposit balances in either bank, and repayment will be a single lump sum at maturity.

Reference no: EM133674510

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