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( Related to Checkpoint 1 8 . 2 ) ( Estimating the cost of bank credit ) Paymaster Enterprises has arranged to finance its seasonal

(Related to Checkpoint 18.2)(Estimating the cost of bank credit) Paymaster Enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. The loan will
carry a rate of 16 percent per annum with interest paid in advance (discounted). In addition, Paymaster must maintain a minimum demand deposit with the bank of 10 percent of the loan balance
throughout the term of the loan. If Paymaster plans to borrow $120,000 for a period of 2 months, what is the annualized cost of the bank loan?
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