Question: 7. Suppose your firm is seeking a three year, amortizing $400,000 loan with annual payments and your bank is offering you the choice between a

7. Suppose your firm is seeking a three year, amortizing $400,000 loan with annual payments and your bank is offering you the choice between a $415,000 loan with a $15,000 compensating balance and a $400,000 loan without a compensating balance. The interest rate on the $400,000 loan is 9.5 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it?

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