QUESTION 2 Assume a 365-day year, calculate the annual effective interest rate (EIR) of the following financing choices for 2019 a) Unicorn Corporation has a RM650,000 line of credit at 1 percent above the bank's base lending rate (BLR). During the year, the company borrows RM250,000 on the line of credit and no compensating balances are required. The bank's prime rate is 6 percent from January 1 to March 31, 2019 and on April 1, 2019 the bank raises its prime rate to 6.8 percent, where it remains for the rest of the year. (6 marks) b) Top Lame Bhd needs to acquire RM850,000 in five months for a diversification project. A RM2 million revolving credit agreement offered by its bank to borrow at the prime rate at 6.5 percent. The agreement requires the company to maintain a 10 percent average compensating balance on any funds borrowed under the agreement. In addition, the commitment fee is 15 percent on the unused fund. (5 marks) c) Sinar Mentari Sdn Bhd needs to acquire RM750,000 in eight months for a new project. The company issues an 8-month commercial paper with a value of RM50,000 each paper at 10 percent per annum The issuing cost is RM2,700 per paper (5 marks) d) Ayaya Bhd is facing a shortage of RM150,000 for a period of three months. They decided to borrow from OKB. The bank charges an interest of 7 percent per annum and requires compensating balance of 9.5 percent (4 marks)