Analog Computers needs to borrow $475,000 from the Midland Bank. The bank requir

Question

Analog Computers needs to borrow $475,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with $475,000 spendable cash?  

A.

$546,250

B.

$758,264

C.

$558,824

D.

None of these options

Analog Computers needs to borrow $475,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with $475,000 spendable cash?  

A.

$546,250

B.

$758,264

C.

$558,824

D.

None of these options

Explanation / Answer

The bank requires 15% compensating balance. So, the bank will disburse (100 - 15) = 85% of the borrowed amount which will be the spendable cash of the entity.

So, 85% of borrowed amount = $475,000

So, Borrowed amount = $475,000 / 0.85 = $558,824. So, option C is the correct option.

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