Multiple Choice
All Rite Co.has arranged a line of credit of $225,000 with an interest rate of 8.25 percent and a compensating balance requirement of 1.5 percent,which is based on the total amount borrowed.Assume the firm uses this source of funding to purchase a $167,000 piece of equipment and repays the loan in a lump sum at the end of one year.What is the effective interest rate?
A) 9.75 percent
B) 9.27 percent
C) 8.08 percent
D) 8.26 percent
E) 8.38 percent
Correct Answer:
Verified
Correct Answer:
Verified
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