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Your brother has just taken out a loan for $75,000. The stated (simple) interest rate on this loan is 10 percent, and the bank requires
Your brother has just taken out a loan for $75,000. The stated (simple) interest rate on this loan is 10 percent, and the bank requires him to maintain a compensating balance equal to 15 percent of the initial face amount of the loan. He currently has $20,000 in his checking account, and he plans to maintain this balance. The loan is an add-on installment loan which he will repay in 12 equal monthly installments, beginning at the end of the first month. Refer to Exhibit Brother's Loan. What is the nominal annual add-on interest rate on this loan? a. 10.00% b. 18.83% c. 20.00% d. 24.00% e. 16.47% Your brother has just taken out a loan for $75,000. The stated (simple) interest rate on this loan is 10 percent, and the bank requires him to maintain a compensating balance equal to 15 percent of the initial face amount of the loan. He currently has $20,000 in his checking account, and he plans to maintain this balance. The loan is an add-on installment loan which he will repay in 12 equal monthly installments, beginning at the end of the first month. Refer to Exhibit Brother's Loan. What is the nominal annual add-on interest rate on this loan? a. 10.00% b. 18.83% c. 20.00% d. 24.00% e. 16.47%
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