The Jetson Co

question 6

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%

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