How much is the effective cost if you need to borrow $400,000 for one year with $475,000 line credit, where any borrowing have a single payment interest of 20% and there is a 1.5% fee for any unused credit? a) 12% b) 8.7% c) 2.04% d) 20.28% e) 17.65%

How much is the effective cost if you need to borrow $400,000 for one year with $475,000 line credit, where any borrowing have a single payment interest of 20% and there is a 1.5% fee for any unused credit? a) 12% b) 8.7% c) 2.04% d) 20.28% e) 17.65%

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

Question

100%

a) 12%

b) 8.7%

c) 2.04%

d) 20.28%

e) 17.65%

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