Winegartner cosmetics is setting up a line of credit at its, Ask an Expert

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Winegartner Cosmetics is setting up a line of credit at its bank for $5 million for up to two years. The interest rate is 5.875 percent and the loan agreement calls for an annual fee of 40 basis points on any unused balance for the year. If the firm borrows $2 million on the day the loan agreement is signed, what is the firm's effective rate?

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