Midtown Distributors is offered a 2/10 net 30 trade discount by its supplier. In the past Midtown has been able to get away with paying for supplies on credit in 40 days. Since it doesn't have money on hand to take advantage of the discount, Midtown tries to negotiate a loan with Scotia Bank. The amount of $450,000 with a 10% compensating balance and a 15% interest rate has been negotiated for the month of April. Midtown already maintains a $20,000 balance at the bank.