You’ve worked out a line of credit arrangement that allows you to borrow up to $

Question

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 0.587 percent per month. In addition, 2 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.

What is the effective annual interest rate on this lending arrangement? (Do not include the percent sign (%). Round your answer to 2 decimal places (e.g., 32.16).)

Suppose you need $28.42 million today and you repay it in four months. How much interest will you pay? (Do not include the dollar sign ($). Enter your answer in dollars, not millions of dollars (e.g., 1,234,567). Round your answer to 2 decimal places (e.g., 32.16).)

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 0.587 percent per month. In addition, 2 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.

Explanation / Answer

You’ve worked out a line of credit arrangement that allows you to borrow up to $

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