Reference no: EM132683960
In exchange for a $410 million fixed commitment line of credit, your firm has agreed to do the following:
1. Pay 2.4% per quarter on any funds actually borrowed.
2. Maintain a 4% compensating balance on any funds actually borrowed.
3. Pay an up-front commitment fee of 0.110% of the amount of the line.
Based on this information, answer the following:
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate : %
b. Suppose your firm immediately uses $180 million of the line and pays it off in one year. What is the effective annual interest rate on this $180 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate: %
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