What is effective rate of interest

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Reference no: EM131976801

Carey Company is borrowing $325,000 for one year at 15.0 percent from Second Intrastate Bank. The bank requires a 20 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).

a. What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

b. What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM131976801

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