Problem $16-13$ Costs of Borrowing $[$LO $3]$

You've worked out a line of credit arrangement that allows you to borrow up to $$50$ million at any time. The interest rate is $\mathrm{.}379$ percent per month. In addition, $4$ percent of the amount that you borrow must be deposited in a noninterest$-$bearing account. Assume that your bank uses compound interest on its line$-$of$-$credit loans.

a$.$ What is the effective annual interest rate on this lending arrangement?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}1$

b$.$ Suppose you need $$35$ million today and you repay it in six months. How much interest will you pay?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.$

$\backslash$table$[[$a$.$ Effective annual rate,,$\%$

You've worked out a line of credit arrangement that allows you to borrow up to $$50$ million at any time. The interest rate is $\mathrm{.}379$ percent per month. In addition, $4$ percent of the amount that you borrow must be deposited in a noninterest$-$bearing account. Assume that your bank uses compound interest on its line$-$of$-$credit loans.

a$.$ What is the effective annual interest rate on this lending arrangement?

Note: Do not round intermediate calculations and enter your answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}1$

b$.$ Suppose you need $$35$ million today and you repay it in six months. How much interest will you pay?

Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to $2$ decimal places, e$.$g$.,1,234,567\mathrm{.}89.$

a$.$ Effective annual rate

b$.$ Total interest paid