A Firm Borrows $200,000 from the Bank, but Has to Maintain

question 85

Multiple Choice

A firm borrows $200,000 from the bank, but has to maintain a compensating balance of $15,000 with the bank.The annual interest rate for the loan is 13%.What is the effective annual rate if the interest is compounded annually?

• A)12.03%
• B)13.00%
• C)14.05%
• D)14.41%

---

Definitions:

Inhabited

Occupied by residents, referring to a place where living organisms, including humans, live and grow.

Monkeys

Members of the primate order, characterized by a tail (unlike apes), higher brain functions, and a wide range of behaviors and habitats.

Anthropoids

A group of primates that includes monkeys, apes, and humans, characterized by their higher brain to body size ratio and more complex behavior.

Hominoids

A taxonomic group that includes all modern and extinct great apes and humans.