Question
In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: Pay 1.6 percent per quarter on
In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:
Pay 1.6 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 .30 percent of the amount of the line.
In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:
Pay 1.6 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 .30 percent of the amount of the line.
Based on this information, answer the following:
Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?
Suppose your firm immediately uses $210 million of the line and pays it off in one year. What is the effective annual interest rate on this $210 million loan?
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
16th Edition
78110939, 978-0078110931
