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MMLU / The Houser Company has negotiated a …

Problem

Answer published by the source. Consult the official source to check your work against its answer.

question

The Houser Company has negotiated a $500,000 revolving credit agreement with Chitwood National Bank. The agreement calls for an interest rate of 10% on fund used, a 15% compensating balance, and a commitment fee of 1% on the unused amount of the credit line. Assuming that the compensating balance would not otherwise be maintained, the effective annual interest cost if the firm borrows $200,000 for one year is closest to
Plain-text mathematical notation (without MathML)
The Houser Company has negotiated a $500,000 revolving credit agreement with Chitwood National Bank. The agreement calls for an interest rate of 10% on fund used, a 15% compensating balance, and a commitment fee of 1% on the unused amount of the credit line. Assuming that the compensating balance would not otherwise be maintained, the effective annual interest cost if the firm borrows $200,000 for one year is closest to
Original LaTeX notation
The Houser Company has negotiated a $500,000 revolving credit agreement with Chitwood National Bank. The agreement calls for an interest rate of 10% on fund used, a 15% compensating balance, and a commitment fee of 1% on the unused amount of the credit line. Assuming that the compensating balance would not otherwise be maintained, the effective annual interest cost if the firm borrows $200,000 for one year is closest to

choices

  1. 11.5 percent.
  2. 15 percent.
  3. 26.5 percent.
  4. 13.53 percent.

subject

professional_accounting

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Source and history

task_id
78ac0646-3077-564c-b2e7-b8989dcea4de
task_key
all--test--78ac0646-3077-564c-b2e7-b8989dcea4de
task_revision_id
1
config / split
all / test

Official source

initial import