4gifts galore inc borrowed 15 million from national city, Ask an Expert

Finance

4Gifts Galore Inc. borrowed $1.5 million from National City Bank. The loan was made at a simple annual interest rate of 9% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate.

a. The nominal annual rate on the loan was 11.25%. What is the true effective rate?

b. What would be the effective cost of the loan if the note required discount?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91610244

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