Nighthawk Lighting Company borrows $300,000 for one year at 7.00% interest. The loan is a discounted loan and also requires a compensating balance of 5%. What is the effective annual rate of interest on this loan? A. 7.00% B. 7.37% C. 7.53% D. 7.96%

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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Financial Accounting

Nighthawk Lighting Company borrows $300,000 for one
year at 7.00% interest. The loan is a discounted loan and
also requires a compensating balance of 5%. What is the
effective annual rate of interest on this loan?
A. 7.00%
B. 7.37%
C. 7.53%
D. 7.96%
Transcribed Image Text:Nighthawk Lighting Company borrows $300,000 for one year at 7.00% interest. The loan is a discounted loan and also requires a compensating balance of 5%. What is the effective annual rate of interest on this loan? A. 7.00% B. 7.37% C. 7.53% D. 7.96%
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