Scan Bookkeeping has a $200,000 compensating balance loan with its bank. The terms of the loan...
Scan Bookkeeping has a $200,000 compensating balance loan with its bank. The terms of the loan call for Scan to keep 5% of the loan as a compensating balance and pay interest at an annual rate of 6.50% on the entire amount. If the firm borrows the maximum amount for one year, how much interest is due at the end of the year?
A.$10,650
B.$12,375
C.$11,250
D.$13,000
Homework Answers
Since interest is paid on the entire amount
Interest due at the end of the year = Loan amount*Interest rate
= 200,000*6.5%
= $13,000
Hence, the answer is D.
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