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Your company has arranged a revolving credit agreement for up to $78 million at an interest rate of 1.47 percent per quarter. The agreement also requires your company to maintain a compensating balance of 4 percent of the unused portion of the credit line, to be deposited in a non-interest bearing account. Your company's short-term investment account at the same bank pays an interest rate of 0.61 per quarter. What is the effective annual interest rate if your company borrows $43 million for one year? Please show work.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93046252

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