What is the effective interest rate for loan

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Reference no: EM131354193

You need to borrow $100,000 on your line of credit to cover incrased working captal expense due to sales growth. Bnak A is willing to lend to you at 7.5% with 10% compensating balances. Bank B will lend at 8.25 with 5% compensating balances. Bank C will lend with no compensating bakances but the interest rate is 9.5%.

A. How much will you have to borrow form each bakn to have the amount you need?

B. What is the effective interest rate for loan?

C. Which loan would you choose? Explain your answer.

Reference no: EM131354193

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