Gifts Galore Inc. borrowed $1.5 million from National City Bank. The loanwas made at a simple annual interest rate of 9% a year for 3 months. A 20%compensating balance requirement raised the effective interest rate.a. The nominal annual rate on the loan was 11.25%. What is the trueeffective rate?
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
Gifts Galore Inc. borrowed $1.5 million from National City Bank. The loan
was made at a simple annual interest rate of 9% a year for 3 months. A 20%
compensating balance requirement raised the effective interest rate.
a. The nominal annual rate on the loan was 11.25%. What is the true
effective rate?
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