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(Related to Checkpoint 18.3) (Calculating the cost of short-torm financing) You plan to borrow S50,000 from the bank to pay for invontories for a gift

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(Related to Checkpoint 18.3) (Calculating the cost of short-torm financing) You plan to borrow S50,000 from the bank to pay for invontories for a gift shop you have fust opened. The bank offers to lend you the money at 9 percent annual interest for the 3 months the funds will be needed (assume a 360 -day year). a. Calculate the annualized rate of interest on the loan. b. In addition, the bank requires you to maintain a 14 percont compensating balance in the bark. Bocause you are just oponing your business, you do not have a demand deposit account at the bank that can be used to meot the compensabing-balance requirement. This means that you will have to put 14 percent of the loan amount (which you had planned to use to holp finance the buriness) in a checking account. What is the cost of the loan now? c. In addition to the compensating.balance requirement in part b. you aro told that irtorost wil be discourfed. What is the annualizod rate of interest on the loan now? a. The effective rate of interest. or APR, on the loan is 9%. (Round to two docimai placos,) b. If the bank requires you to maintain a compensating balance of 14 porcent in the barks the effectuo ancin coist of the loien now is x. (Round to two decimal places.)

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