a. What interest rate would make it worthwhile to incur a compensating balance of $16,000 in order to get a 1-percent lower interest rate on a 1-year, pure discount loan of $255,000? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Interest rate %
a. What interest rate would make it worthwhile to incur a compensating balance of $16,000 in order to get a 1-percent lower interest rate on a 1-year, pure discount loan of $255,000? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.) Interest rate %
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter5: Time Value Of Money
Section: Chapter Questions
Problem 27P
Related questions
Question
please answer within 30 minutes.
![Problem 14-9 Compensating Balance (LG14-7)
a. What interest rate would make it worthwhile to incur a compensating balance of $16,000 in order to get a 1-percent lower interest
rate on a 1-year, pure discount loan of $255,000? (Negative amount should be indicated by a minus sign. Do not round
intermediate calculations and round your answer to 2 decimal places.)
%
Interest rate
b. Is it worth incurring the compensating balance to obtain the lower rate?
O Yes
O No](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd162c1e0-4fa0-4043-a5a9-005ca139010d%2F2085c207-993e-4a7f-a679-d9905aecc06c%2Fyoa6ta_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 14-9 Compensating Balance (LG14-7)
a. What interest rate would make it worthwhile to incur a compensating balance of $16,000 in order to get a 1-percent lower interest
rate on a 1-year, pure discount loan of $255,000? (Negative amount should be indicated by a minus sign. Do not round
intermediate calculations and round your answer to 2 decimal places.)
%
Interest rate
b. Is it worth incurring the compensating balance to obtain the lower rate?
O Yes
O No
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