Posted by patricia on .
Your firm is considering the following three alternative bank loans for $1,000,000:
A) 10 percent loan paid at year end with no compensating balance.
B) 9 % laon paid at year end with a 20% compesating balance.
C)6% loan that is discounted with a 20% compensating balance.
We were given hints to solve each problem which I have. the next question is the one I need help with.
Assume that you would normally not carry any bank balance that would meet the 20% compensating balance requirement. WHat is the rate of annual interest on each loan?