Calculate the annual effective interest rate (EIR) of the following financing agreements for 2020.

Abrar Bhd requires RM600,000 in eight months. The company decided to obtain a revolving line of credit of RM800,000 from Maybank. The bank charges 10 percent interest rate and 5 percent commitment fee.

(5 marks)

Rainbow Bhd requires funds of RM900,000 in nine months. A RM1 million revolving credit agreement is offered by Maybank to borrow at the prime rate of 12 percent. The bank requires the company to maintain a 10 percent compensating balance on funds borrowed under the agreement. In addition, the commitment fee is 5 %. (6 marks)

Inaccess Bhd needs RM1,200,000 for six months to finance a new machine. The company will issue commercial papers with a value of RM60,000 each paper with an interest rate of 12 percent per annum. The issuing cost is RM1,000 per paper.

(5 marks)