Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 18P
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Question
A company received a P 500,000 line of credit from its bank. Some information about the credit line is as follows:
Stated interest rate 10%
Compensating balance requirement 20%
Assuming that the company drew down the entire amount at the beginning of the year, and that the loan is discounted, what is the effective interest rate on the loan?
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