Question
Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with
Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discount interest loan). Also, assume that the bank requires you to maintain a compensating balance equal to 10 percent of the initial loan value. What effective annual interest rate are you being charged?
| A. | 14.00% | |
| B. | 24.00% | |
| C. | 28.00% | |
| D. | 18.42% | |
| E. | 16.28% |
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International Corporate Finance
Authors: Mark R. Eaker, Frank J. Fabozzi, Dwight Grant
1st Edition
0030693063, 9780030693069
