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You have worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is
You have worked out a line of credit arrangement that allows you to borrow up to $50 million at any time. The interest rate is 0.5 percent per month. In addition, 7 percent of the amount that you borrow must be deposited in a non-interest bearing account. Assume your bank uses compound interest on its line of credit loans. What is the effective annual interest rate on this lending arrangement?
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