BONUS POINT PROBLEMS 9. Your firm has a $50,000 line of credit with a local bank. The credit line agreement calls for interest of 9 percent with a compensating balance requirement of 5 percent of the amount borrowed. What is the effective interest rate if you need to borrow $42,750 for one year to cover your operating expenses (SHOW YOUR WORK) ANSWER (5 POINTS) 3. The price of ABD Corp. stock will be either $70 or $55 in one year from now. Currently, the price of the company's stock is $60 and the risk-free rate is 2 percent. What is the value of a one year call option on ABD's stock if the exercise price is $65 per share? (SHOW YOUR WORK) ANSWER (5 POINTS) 65-60/1.09