What is the effective annual rate on a six-month loan

Reference no: EM13292900

Bank A offers loans with a 10 percent stated annual rate and a 10 percent compensating balance. You wish to obtain $250,000 in a six-month loan.

a. How much must you borrow in order to obtain $250,000 in usable funds? Assume you currently do not have any funds on deposit at the bank. What is the effective annual rate on a six-month loan?

b. How much must you borrow in order to obtain $250,000 in usable funds if you currently have $10,000 on deposit at the bank? What is the effective annual rate on a six-month loan?

c. How much must you borrow in order to obtain $250,000 in usable funds if you currently have $30,000 on deposit at the bank?

d. What is the effective annual rate on a six-month loan?

Reference no: EM13292900

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