KK Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 5.60 percent and the loan agreement calls for an annual fee of 53 basis points on any unused balance for the year. If the firm borrows $2.1 million on the day the loan agreement is signed, what is the effective rate for the line of credit?

KK Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 5.60 percent and the loan agreement calls for an annual fee of 53 basis points on any unused balance for the year. If the firm borrows $2.1 million on the day the loan agreement is signed, what is the effective rate for the line of credit?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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