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Harley Davis Ltd. (HDL) was granted a one-year $2 million operating line of credit at a rate of 6.25% in anticipation for year 2020. There
Harley Davis Ltd. (HDL) was granted a one-year $2 million operating line of credit at a rate of 6.25% in anticipation for year 2020. There is a monthly 0.75% commitment fee on the unused amount. Based on the recent forecast, HDL will borrow only $1.25 million during January-September 2020 and further reduce by $0.2 million for the remaining 3 months. What is the effective annual cost (in percent) of this loan arrangement?
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