example Letter of credit 1,000,000 90 days compensating balance fee stated rate bank reqts: min margin - balance in account commitment fee % of L/C Bank A: 300,000 flat 100 1.000% Bank B 400,000 flat 150 5.0000% Bank C 700,000 flat 50 2.5000% For all banks, calculate the effective rate of interest for a Letter of credit ( banker Acceptance ) of 1,000,000.00 "the general formula for calculating the effective annual rate of interest rate on a short term loan is: (total interest paid+ total fees paid if any/useable funds)x(365days/number of days of loan is outstanding)