Line of credit arrangement-non-interest-bearing account

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Reference no: EM13975215

You've worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is .47 percent per month. In addition 4% of the amount that you borrow must be deposited in a non-interest-bearing account. Assume that your bank uses compound interest on its line of credit loans. Showing the steps.

a. What is the effective annual interest rate on this lending arrangement?

b. Suppose you need $15 million and you repay it in 6 months. How much interest will you pay?

Reference no: EM13975215

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