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What is the effective interest rate

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Question - The Babco Co. has a $225,000 line of credit with an interest rate of 6.5 percent and a compensating balance requirement of 4 percent that is based on the total amount borrowed. What is the effective interest rate if the firm needs $163,000 to finance some expenses? The company plans on repaying the loan in a lump sum at the end of 1 year.

Reference no: EM132856969

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