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If Analog Computers can borrow at 8% annually for three years, what is the effective rate of interest on a $1,000,000 loan where a 15% compensating balance is required?

Respuesta :

Answer:

effective interest rat = 0.094 or 9.41%

Explanation:

effective rate of interest is given as[tex]effective\ interest\ rate = \frac{borrowing\ interest \ rate}{1 -compensating\ balancing \requirement \rate}[/tex]

borrow interest rate = 8%

compensating rate  =15%

effective interest rate = \frac{8%}{1 -15%}

                                    [tex]= \frac{0.08}{1-0.15}[/tex]

         effective interest rat = 0.094 or 9.41%

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