Suppose Your Firm Is Seeking a Seven-Year, Amortizing $400,000 Loan

question 36

Multiple Choice

Suppose your firm is seeking a seven-year, amortizing $400,000 loan with annual payments and your bank is offering you the choice between a $410,000 loan with a $10,000 compensating balance and a $400,000 loan without a compensating balance. If the interest rate on the $400,000 loan is 9.5 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) The rate would have to be lower than 8.76 percent.
• B) The rate would have to be lower than 8.29 percent.
• C) The rate would have to be lower than 8.14 percent.
• D) The rate would have to be lower than 7.99 percent.

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Definitions:

Utility Gloves

Gloves designed for general work or specific utilities to protect hands from various hazards.

Acidic-pH Detergent

Cleaning agents designed to work optimally in low pH conditions, often used for dissolving mineral deposits and rust.

Pathogenic Microorganisms

Harmful bacteria, viruses, or other microbes that can cause diseases or infections in humans and other organisms.

Bacterial Spores

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