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15-12 (similar to) Question Help Compensating balances and effective annual rates Lincoln Industries has a line of credit at Bank Two that requires it to
15-12 (similar to) Question Help Compensating balances and effective annual rates Lincoln Industries has a line of credit at Bank Two that requires it to pay 9% interest on its borrowing and to maintain a compensating balance equal to 10% of the amount borrowed. The firm has borrowed $900,000 during the year under the agreement. Calculate the effective annual rate on the firm's borrowing in each of the following circumstances: a. The firm normally maintains no deposit balance at Bank Two b. The firm normally maintains $50,000 in deposit balance at Bank Two. c. The firm normally maintains $170,000 deposit balance at Bank Two. d. Compare, contrast, and discuss your findings in parts a, b, and c
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