Harold Corporation needs to borrow 1,000,000 in order to take a cash discount from its supplier on credit terms 3/10, net 45. A banker will loan the money for 30 days at an interest cost of 28,000. Assume a 360-day year for your calculations.

3.4 If another banker requires a 15 percent compensating balance, how much must Harold borrow to end up with 1,000,000? (5 points)

3.5 What would be the effective interest rate in question 3.4 if the interest charge for 30 days were 21,000? Since there are no funds to count against the compensating balance requirement, should Harold borrow with the 15 percent compensating balance? (5 points)