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In exchange for a $ 4 0 0 million fixed commitment line of credit, your firm has agreed to do the following: Pay 1 .

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:
Pay 1.96 percent per quarter on any funds actually borrowed.
Maintain a 5 percent compensating balance on any funds actually borrowed.
Pay an up-front commitment fee of 24 percent of the amount of the line.
Based on this information, answer the following:
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.
b. Suppose your firm immediately uses $226 million of the line and pays it off in one year. What is the effective annual interest rate
on this $226 million loan?
Note: Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,32.16.
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