1. On a n average daily basis, Memphis Metro borrows $400,000 from a $500,000 committed credit line. The annual interest expense paid is $14,500, and the commitment fee equals $500.

a. C alculate the effective cost of the credit line.

b. R ecalculate the effective cost of the credit line with a compensating balance of 5%.

c. R ecalculate the effective cost of the credit line with a compensating balance of 10%.

d. R ecalculate the effective cost of the credit line with a compensating balance of 15%.