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Effective annual rate. A financial institution made a $4 million, 1-year discount loan at 6% interest, requiring a compensating balance equal to 5% of the
Effective annual rate. A financial institution made a $4 million, 1-year discount loan at 6% interest, requiring a compensating balance equal to 5% of the face value of the loan. Determine the effective annual rate associated with this loan. (note: assume that the firm currently maintains $0 on deposit in the financial institution)
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Finance At The Threshold
Authors: Christopher Houghton Budd
1st Edition
0566092115, 978-0566092114
