Charlie's Snake Shop has an outstanding 120-day bank loan of $300,000 at an annual interest rate of 3.90%. The company is required to maintain a 15% compensating balance in its chequing account. What is the annual interest cost on the loan? The company has idle cash in the amount of $20,000 that will count toward the compensating balance. Select one: a. 2.85% Ob. 2.62% Oc. 2.14% Od 7.96%

Charlie's Snake Shop has an outstanding 120-day bank loan of $300,000 at an annual interest rate of 3.90%. The company is required to maintain a 15% compensating balance in its chequing account. What is the annual interest cost on the loan? The company has idle cash in the amount of $20,000 that will count toward the compensating balance. Select one: a. 2.85% Ob. 2.62% Oc. 2.14% Od 7.96%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Charlie's Snake Shop has an outstanding 120-day bank loan of $300,000 at
an annual interest rate of 3.90%. The company is required to maintain a 15%
compensating balance in its chequing account. What is the annual interest
cost on the loan? The company has idle cash in the amount of $20,000 that
will count toward the compensating balance.
Select one:
O a. 2.85%
Ob. 2.62%
O c. 2.14%
Od 7.96%

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