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You have recently worked out a line of credit arrangement that allows you to borrow up to $50 million at anytime. The interest rate for
You have recently worked out a line of credit arrangement that allows you to borrow up to $50 million at anytime. The interest rate for this is 0.47% per month. In addition to this, 4% of the amount you borrow must be deposited in a non-interest-bearing account. Assume that your bank uses compound interest on its line of credit loans. What is the effective annual interest rate on this lending arrangement?
a) 7.20%
b) 4.88%
c) 6.04%
d) 6.20%
C is correct
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