Suppose Your Firm Is Seeking a 3-Year, Amortizing $300,000 Loan

question 51

Multiple Choice

Suppose your firm is seeking a 3-year, amortizing $300,000 loan with annual payments and your bank is offering you the choice between a $305,000 loan with a $5,000 compensating balance and a $300,000 loan without a compensating balance. If the interest rate on the $300,000 loan is 8 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

• A) 8 percent
• B) 7.09 percent
• C) 1.67 percent
• D) 7.98 percent

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Definitions:

Adulthood

The period in human life characterized by fully developed physical growth and maturity, as well as legal responsibility for one's actions.

Psychosexual Development

Development of the psychological components of sexuality.

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Various channels, platforms, and technologies used for communication and dissemination of information, including print, broadcast, and digital forms.