Smithfield's Has a Line of Credit with a Local Bank

question 77

Multiple Choice

Smithfield's has a line of credit with a local bank of $75,000.The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed.What is the effective interest rate if the firm needs $58,000 for 1 year to finance a fixed asset purchase?

• A)8)55%
• B)6)34%
• C)7)13%
• D)7)38%
• E)6)19%

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Definitions:

Nicotine

A stimulating and highly addictive chemical found in tobacco that affects the central nervous system.

Acetylcholine

A neurotransmitter in the brain and body that plays significant roles in muscle activation, memory, and learning.

Half-life

The time required for the concentration of a substance in the body to decrease by half, often used in the context of drug metabolism.

Substance Use

The ingestion, inhalation, injection, or application of psychoactive substances, which may lead to addiction in some individuals.