Fixed commitment line of credit

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Reference no: EM13924709

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1.84 percent per quarter on any funds actually borrowed. 2. Maintain a 2 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of 0.29 percent of the amount of the line. Required: Based on this information, answer the following: (a) Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Effective annual rate % (b) Suppose your firm immediately uses $214 million of the line and pays it off in one year. What is the effective annual interest rate on this $214 million loan? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Effective annual rate %

Reference no: EM13924709

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