Question
In exchange for a $500 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 2.0% per quarter on
In exchange for a $500 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 2.0% per quarter on any funds actually borrowed. 2. Maintain a 4% compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.200% 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?
Effective annual interest rate % =
b. Suppose your firm immediately uses $200 million of the line and pays it off in one year. What is the effective annual interest rate on this $200 million loan? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Effective annual interest rate % =
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Online Marketing For Hotels The Definitive Guide To Direct Distribution How To Get The Most Out Of Your Advertising Money And Boost Website Revenue
Authors: Jan Sammeck
1st Edition
1798527871, 978-1798527870
