Solution-Unused portion of the credit line

Unused portion of the credit line

Reference no: EM132354764

You receive a line of credit of $10,000. Interest on the borrowed amount is 10% per year. You must maintain a 15% compensating balance on outstanding loans and pay a commitment fee (paid at the end of the period) of 1% of the unused portion of the credit line.

a. Calculate the AFC if the amount borrowed is $4,000 for 6 months.

b. Calculate the AFC if the amount borrowed for 6 months is the full credit limit of $10,000.

c. You plan on borrowing $4,000 (as in Part a), but you want the AFC to be what is in Part b. All other things equal, what must be the new value for the stated interest rate?

Reference no: EM132354764

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Unused portion of the credit line

Reference no: EM132354764

Reference no: EM132354764

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