Question

our company plans to borrow $12 million for 12 months, and your banker gives you a stated rate of 21 percent interest.  
  
Calculate the effective rate of interest for the following types of loans.  
  
a. Simple 21 percent interest with a compensating balance of 12 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)
  

	Effective rate of interest %

  
  
b. Discounted interest (with no compensating balance). (Input your answer as percent rounded to 2 decimal places.)

	Effective rate of interest %

  
  
c. An installment loan (12 payments). (Input your answer as a percent rounded to 2 decimal places.)
  

	Effective rate of interest %

d. Discounted interest with a compensating balance of 6 percent. (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.)

	Effective rate of interest %

Answer 1