The Jetson Co

question 47

Multiple Choice

The Jetson Co.has an £80,000 line of credit with a 12% interest rate and a 10% compensating balance requirement which is based on the total amount borrowed.What is the effective annual
Interest rate if the firm needs £45,000 of cash for one year?

• A)10.80%
• B)11.44%
• C)12.12%
• D)13.33%
• E)13.78%

---

Definitions:

Face Value

The nominal value printed on a coin, banknote, security, or bond, not necessarily its current market value.

Par Value

The face value of a bond or stock as stated by the issuing company, unrelated to its market value.

Market Value

The market price at which an asset or service is currently available for trading.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power over time.