Henderson Inc. needs to raise $400,000 for a nine-month term. Hendersons bank has offered to lend Henderson the money at a 16.00% simple interest rate. Henderson will receive the $400,000 upon approval of the loan and will pay back the principal and interest at maturity.

Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan.

	Value
Interest payment (56,320, 48,000, 42,240, 64,000)
Amount of cash received (448,000, 400,000, 343,680, 352,000)
Annual percentage rate (APR) (9.00%, 16.00%, 12.00%, 13.00%)
Effective annual rate (EAR) (16.31%, 8.87%, 12.00%, 16.00%)

Suppose the terms of the loan require that Henderson maintain a compensating balance equal to 15% of the loan balance, and Henderson will have to borrow the compensating balance from the bank.

Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of the loan considering the compensating balance requirement.

	Value
Interest payment (48,000, 56,471, 90,354, 67,765)
Amount of cash borrowed (400,000, 470,588, 752,941, 564,706)
Annual percentage rate (APR) (1.59%, 18.83%, 0.79%, 16.00%)
Effective annual rate (EAR) (16.31%, 19.26%, 19.86%, 20.66%)