You\'ve worked out a line of credit arrangement that allows you to borrow up to

Question

You've worked out a line of credit arrangement that allows you to borrow up to $40 million at any time. The interest rate is 0.55 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line of credit loans.

The effective annual interest rate on this lending arrangement ispercent.(Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16))

Suppose you need $10 million today and you repay it in 7 months. You will pay $in interest.(Do not include the dollar sign ($). Round your answer to 2 decimal places. (e.g., 32.16))

I need help on ptart B, I have part A done but I came up with the wrong answer of62901041.69.

You've worked out a line of credit arrangement that allows you to borrow up to $40 million at any time. The interest rate is 0.55 percent per month. In addition, 4 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line of credit loans.

Explanation / Answer

a).55%*12*1.05=6.93 b)10M*6.93%*12/7=$118.8M

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