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Question
Kerry Corporation must pay $500,000 to its supplier. Kerry's bank has offered a 270-day simple interest loan with a quoted interest rate of 12 percent. The bank requires a 20 percent compensating balance requirement on business loans. If Kerry currently holds no funds at the lending bank, what is the loan's effective annual rate (rEAR)? In your computations, assume there are 360 days in a year.
a. 11.25%
b. 15.00%
c. 12.00%
d. 15.27%
e. 11.35%
Answer
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Related questions
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