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Digital Access Inc. needs $250,000 in funds for a project. (Assume the loan term is one year.) a. With a compensating balance

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Answer #1

Amount required to be borrowed = funds required/(1-Compensating balance)

= 250,000/(1-20%)

= $312,500

b.Effective rate of interest = Amount of Interest/Loan Utilized

= 312500*10%/250,000

= 12.5%

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