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What is the effective annual interest rate

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Question - Western Union has grated GAMING Ltd a line of credit that allows it to borrow up to $50 million at any time. The interest rate is .47% per month. But GAMING Ltd is required to have 4% of the borrowed amount deposited in a non-interest-bearing account. Assume the bank uses compound interest on its line of credit loans. Show your work on the following:

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

Suppose GAMING Ltd need $9 million today and repay it in six months. How much interest will it pay?

Reference no: EM133087847

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