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As treasurer of your firm, you wish to establish a credit line facility to cover an expected average annual borrowing of $10 million. Bank of
As treasurer of your firm, you wish to establish a credit line facility to cover an expected average annual borrowing of $10 million. Bank of the West proposes a nominal rate of 6 percent on a credit line of $30 million, a commitment fee of 25 basis points on the unused portion of the credit line and a 35 percent compensating balance on the amount borrowed. What is the effective cost of borrowing? Select one: a. 10% b. 9.62% c. 16.92% d. 13.08%
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