1. Suppose your firm is seeking a four year, amortizing $350,000 loan with annual payments and your bank is offering you the choice between a $362,500 loan with a $12,500 compensating balance and a $350,000 loan without a compensating balance. The interest rate on the $350,000 loan is 9.8 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Interest rate %

2. Veggie Burgers, Inc., would like to maintain its cash account at a minimum level of $261,000 but expects the standard deviation in net daily cash flows to be $13,600, the effective annual rate on marketable securities to be 3.1 percent per year, and the trading cost per sale or purchase of marketable securities to be $35.50 per transaction.

What will be its optimal upper cash limit? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places.)

Optimal upper cash limit

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