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Question
Gripp Corporation needs $765,000 to pay one of its suppliers. The bank requires a compensating balance equal to 15 percent on loans to companies. Because Gripp currently holds no funds at the lending bank, it must borrow enough to have $765,000 available to pay its suppliers after covering the compensating balance. How much must Gripp borrow so that it has $765,000 to pay its suppliers? In your computations, assume there are 360 days in a year.
a. $879,750
b. $765,000
c. $573,750
d. $900,000
e. $5,100,000
Answer
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