Hi expert please give me answer general accounting Phoenix Manufacturing borrows $500,000 for one year at 6.50% interest. The loan is adiscounted loan and requires a compensating balance of 4%. What is the effective annualrate of interest?A) 6.50%B) 6.89%C) 7.12%D) 7.27%

Step 1: Define Effective Annual Rate (EAR)The Effective Annual Rate (EAR) is the true cost of…

Answered: Phoenix Manufacturing borrows $500,000…

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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Phoenix Manufacturing 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 of interest? A) 6.50% B) 6.89% C) 7.12% D) 7.27%