Answered: Horizon Technologies borrows $500,000…

Horizon Technologies borrows $500,000 for one year at 6.50% interest. The loan is a discounted loan and requires a compensating balance of 4%. What is the effective annual rate (EAR) on this loan?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 7FPE: Calculating interest and APR of installment loan. Assuming that interest is the only finance charge,...

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Question

What is the effective annual rate on this loan for this financial accounting question?

Horizon Technologies borrows $500,000 for one year at
6.50% interest. The loan is a discounted loan and requires
a compensating balance of 4%. What is the effective
annual rate (EAR) on this loan?

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