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You've worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is 0.574 percent per month. In addition, 5 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans.

Required:

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

(b) Suppose you need $15.20 million today and you repay it in seven months. How much interest will you pay?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9868987

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