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Cost of Borrowing. You've worked out a line of credit arrangements that allow you to borrow up to $50 million at any time. The interest rate is 53 percent per month. Also, 5 percent of the amount that you borrow must be deposited in a non-interests-bearing account.Assume that your bank uses compound interest on its line of credit loans.

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

b. Suppose you need $15 million today and you repay it in six months. How much interest will you pay?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92778416

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