8. value 10.00 points You\'ve worked out a line of credit arrangement that allow

Question

8. value 10.00 points You've worked out a line of credit arrangement that allows you to borrow up to $45 million at any time. The interest rate is 0.45 percent per month In addition. 5 percent of the amount that you borrow must be deposited in a non-interest-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 round your final answer to 2 decimal places. (e.g., 32.16)) Annual interest rate % b. Suppose you need $15 million today and you repay it in 6 months. How much interest will you pay? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Interest paid $

Explanation / Answer

Effective rate = (1 + (0.0045/(1 - .05)))^12 - 1

= 5.83%

b) Interest to be paid = 15000000*(1+.0045)^6 - 15000000

= 409,583.68

Related Questions

Navigate

• Browse (All)
• Browse 8
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.