Suppose your firm is seeking a five year, amortizing $210,000 loan with annual p

Question

Suppose your firm is seeking a five year, amortizing $210,000 loan with annual payments and your bank is offering you the choice between a $215,500 loan with a $5,500 compensating balance and a $210,000 loan without a compensating balance. The interest rate on the $210,000 loan is 10.0 percent. How low would the interest rate on the loan with the compensating balance have to be for you to choose it? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Interest rate

Explanation / Answer

Effective rate on compensating balanc eloan=215500*x%/210000

This should be less than or equal to 10%

=>x<=10%*210000/215500

So, interest rate on compensating balanc eloan should be less than 9.744% for me to choose

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.