Worked out line of credit arrangement

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Reference no: EM131346411

You’ve worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is .579 percent per month. In addition, 5 percent of the amount that you borrow must be deposited in a noninterest-bearing account. Assume that your bank uses compound interest on its line-of-credit loans.

a. What is the effective annual interest rate on this lending arrangement? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Effective annual rate %

b. Suppose you need $19.95 million today and you repay it in seven months. How much interest will you pay?

Reference no: EM131346411

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