What is effective annual interest rate on line of credit

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Reference no: EM131323019

In exchange for a $450 million fixed commitment line of credit, your firm has agreed to do the following:

1. Pay 2.0 percent per quarter on any funds actually borrowed.

2. Maintain a 4 percent compensating balance on any funds actually borrowed.

3. Pay an up-front commitment fee of 0.150 percent of the amount of the line.

Based on this information, answer the following:

a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?

Reference no: EM131323019

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