Suppose Your Firm Is Seeking a Five-Year, Amortizing $900,000 Loan

question 42

Multiple Choice

Suppose your firm is seeking a five-year, amortizing $900,000 loan with annual payments and your bank is offering you the choice between a $950,000 loan with a $50,000 compensating balance and a $900,000 loan without a compensating balance. If the interest rate on the $900,000 loan is 9.5 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) 9.5 percent
• B) 5.56 percent
• C) 7.43 percent
• D) Not enough information is given to determine

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Definitions:

Light-Independent Reactions

Carbon-fixing second stage of photosynthesis; use ATP and NADPH to assemble sugars from water and CO2.

Thylakoid Compartment

A membrane-bound structure found within chloroplasts that contains the chlorophyll necessary for photosynthesis.

Light-Dependent Reactions

The first phase of photosynthesis where light energy is converted into chemical energy in the form of ATP and NADPH.

Ribulose Bisphosphate (RuBP)

A five-carbon sugar involved in the photosynthetic process, specifically in the Calvin cycle.