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Estimating the cost of bank credit

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Estimating the cost of bank credit

Paymaster Enterprises has arranged to ?nance its seasonal working-capital needs with a short-tenn bank loan. The loan will carry a rate of '14 percent per annum with interest paid in advance {discounted}. In addition, Paymaster must maintain a minimum demand deposit with the bank of 9 percent of the loan balance throughout the term of the loan. If Paymaster plans to borrow $100,000 for a period of 3 months, what is the annualized cost of the bank loan? The annualized cost of the bank loan is %. {Round to two decimal places.)

Reference no: EM133112674

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