Suppose Your Firm Is Seeking a 7-Year, Amortizing $100,000 Loan

question 61

Multiple Choice

Suppose your firm is seeking a 7-year, amortizing $100,000 loan with annual payments and your bank is offering you the choice between a $110,000 loan with a $10,000 compensating balance and a $100,000 loan without a compensating balance. If the interest rate on the $100,000 loan is 7 percent, how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

• A) 7 percent
• B) 10 percent
• C) 4.34 percent
• D) Not enough information is given to know

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Definitions:

Output Coil

In programmable logic controllers (PLCs), an output coil represents a device or actuator to be controlled by the PLC's program.

TON Instruction

A timer instruction used in programming that starts timing when the input condition becomes true and continues until the set time has elapsed.

Accumulated Value

Refers to a value that increases over time, often resulting from the aggregation of multiple increments in a process or calculation.