Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate for a principal of P415,000. Out of the face value of the loan, only P375,000 can be used due to the provision of a compensating balance. What is the effective rate of interest and the compensating balance? A. 8%; 33,200 B. 8%; 40,000 C. 8.55%; 33,200 D. 8.85%; 40,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Bulldogs Inc. loaned a certain amount from a reputable bank for a term of one year at 8% quoted rate for a principal of P415,000. Out of the face value of the loan, only P375,000 can be used due to the provision of a compensating balance. What is the effective rate of interest and the compensating balance?

A. 8%; 33,200
B. 8%; 40,000
C. 8.55%; 33,200
D. 8.85%; 40,000
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Investments and Financial instruments
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education