Question

Firm H paid total interest of $65,000 on its line of credit borrowings for the year, as well as a $1,000 commitment fee. The firm had average daily borrowings of $800,000 for the year, but the bank retained 10% of these borrowings in the form of a compensating balance. What is annual effective rate of interest did Firm H pay on this credit line?

	a.	9.17%
	b.	8.25%
	c.	5.50%
	d.	7.75%

Answer 1

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