How much is your monthly interest payment
Course:- Financial Management
Reference No.:- EM13942903

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You have a line of credit arrangement which allows you to borrow up to $80 million at any time. The interest rate is 0.63% per month. The arrangement also requires a compensating balance equal to 6% of the amount borrowed which must be placed in a non-interest-bearing account. The bank uses compound interest on its LOC loans.

a. If you borrow the entire line, how much will you actually be able to use?

b. How much is your monthly interest payment? What is your periodic interest rate and EAR? c. If you need $19 million and repay it in 10 months, how much interest will you pay?

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