Firm G has a committed credit line in the amount of $5,000,000. The interest rate on the credit line is 4.75%, the commitment fee is 0.35%, and the compensating balance is 10%. The treasurer of Firm G believes that the firm will require average daily borrowings of $4,200,000. To spend $4,200,000 from the line, how much must be drawn from the line?

Suppose that Firm G borrows the amount calculated in Question 11. What is the annual interest expense?

What is the commitment fee?

What is the effective cost of the line?