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Compensating balance versus discount loan   Weathers Catering​ Supply, Inc., needs to borrow $ 145,000 for 6...

Compensating balance versus discount loan   Weathers Catering​ Supply, Inc., needs to borrow $ 145,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 9.1 % subject to a 9.9 % compensating balance.  ​(​Note: Weathers currently maintains $ 0 on deposit in State​ Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 9.1 % with​ discount-loan terms. The principal of both loans would be payable at maturity as a single sum.

a.  Calculate the effective annual rate of interest on each loan.

b.  What could Weathers do that would reduce the effective annual rate on the State Bank​ loan?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 days ago
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