A firm engaged a one-year, monthly pay, $100,000 line of credit at 6 percent plus a 0.25

Question:

A firm engaged a one-year, monthly pay, $100,000 at 6 percent plus a 0.25 percent commitment fee on the unused portion of the line. The firm used 80 percent of the line for the first half year and reduced the loan amount to 40 percent for the rest of the year. What is the effective annual rate of the loan?

Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...