1.Mutiara Bhd recently arranged for a line of credit with the Permata Bank. The terms of the agreement called for a RM150,000 maximum loan with interest set at 12%per annum for 6-month. In addition, Mutiara's must maintain a 5% compensating balance in its demand deposit throughout the year.

a.If mutiara's normally maintainsRM25,000 balance in its checking account with Permata Bank, what is the effective of credit through the line of credit agreement where the maximum loan amount is used for a half year?

b.Recompute the effective cost of credit to Mutiara if the firm has to borrow the

compensating balance and it borrows the maximum possible under the loan agreement