Carey Company
Question
8)Carey Company is borrowing $250,000 for one year at 10.0 percent from Second Intrastate Bank. The bank
requires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed − Compensating balance).
| a. | What is the effective rate of interest? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) |
| Effective rate of interest | % |
| b. | What would the effective rate be if Carey were required to make 12 equal monthly payments to retire the loan? (Use a 360-day year. Input your answer as a percent rounded to 2 decimal places.) |
| Effective rate of interest | % |
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