A Firm Borrows $100,000 from the Bank, but Has to Maintain

question 119

Multiple Choice

A firm borrows $100,000 from the bank, but has to maintain a compensating balance of $20,000 with the bank.The annual interest rate for the loan is 12%.What is the effective annual rate if the interest is compounded quarterly?

• A)12.03%
• B)13.00%
• C)14.05%
• D)15.87%

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Definitions:

Conditioned Opposing Response

A response that opposes the unconditioned response to a stimulus, often developed through the conditioning process to mitigate the effects of the conditioned stimulus.

Secondary A2 Component

A component that is not primary but serves as an additional or supplementary element in various systems or models.

Primary A1 Component

The initial segment of the auditory cortex that processes basic auditory information.

Sometimes-Opponent-Process Theory

A theory suggesting emotional reactions are followed by opposite emotional states; initially applied to psychological explanations of drug addiction.