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borteleto borteleto
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6 years ago
The Boyles Ceramics, Inc. established a line of credit with a local bank. The maximum amount that can be borrowed under the terms of the agreement is $1,000,000 at an annual rate of 8 percent. A compensating balance averaging 25 percent of the amount borrowed is required. Prior to the agreement, Boyles had no deposit with the bank. Shortly after signing the agreement, Boyles needed $240,000 to pay off a note that was due. It borrowed the $240,000 from the bank by drawing on the line of credit. What is the effective annual cost of credit?
A) 12.50%
B) 11.11%
C) 10.67%
D) 8.85%
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
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guzmanguzman
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borteleto Author
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6 years ago
Helps a lot... Now I'm ready for my quiz
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