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Question
DAS, Inc. has a line of credit with FBT Bank that allows DAS to borrow up to $400,000 at an annual interest rate of 11 percent. However, DAS must keep a compensating balance of 25 percent of any amount borrowed on deposit at the bank. DAS does not normally have a cash balance account with the bank. What is the effective annual cost of credit?A) 11.45%
B) 12.59%
C) 14.67%
D) 16.00%
Answer
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