Multiple Choice
The Babco Co. has a $200,000 line of credit with an 8% interest rate and a 10% compensating balance requirement which is based on the total amount borrowed. What is the effective interest rate if the firm uses this source of funding to purchase a $117,000 piece of equipment? The company plans on repaying the loan in a lump sum at the end of one year.
A) 7.20%
B) 7.27%
C) 8.08%
D) 8.80%
E) 8.89%
Correct Answer:
Verified
Correct Answer:
Verified
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