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Montana Allied Products (MAP) must borrow $1.7 million to finance its working capital requirements. The bank has offered a 45-day simple interest loan with a quoted interest rate of 8 percent. Calculate the loan’s APR and rEAR assuming there is (a) no compensating balance requirement and (b) a 15 percent compensating balance requirement, which MAP must satisfy from the loan proceeds. (c) How much does MAP have to borrow so that it has $5.1 million to pay its bills if the loan requires a 15 percent compensating balance?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92167161

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