What is the effective annual interest rate on given loan

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Question: In exchange for a $570 million fixed commitment line of credit, your firm has agreed to do the following: 1. Pay 1 percent per quarter on any funds actually borrowed. 2. Maintain a 3 percent compensating balance on any funds actually borrowed. 3. Pay an up-front commitment fee of .16 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? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Effective annual interest rate 4.19 % b. Suppose your firm immediately uses $200 million of the line and pays it off in one year. What is the effective annual interest rate on this $200 million loan?

Reference no: EM131971867

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