Your Firm Has a Line of Credit with Your Local

question 35

Multiple Choice

Your firm has a line of credit with your local bank for $50,000. The loan agreement calls for interest of 9% with a 5% compensating balance requirement which is based on the total amount borrowed. What is the effective interest rate if you need $42,750 for one year to cover your operating expenses?

• A) 8.55%
• B) 9.00%
• C) 9.13%
• D) 9.38%
• E) 9.47%

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Definitions:

Legitimacy

The general perception that an action, entity, or law is appropriate, just, and acceptable within a societal context.

Employee Ownership

A business model where employees have a significant stake in the company, often through stock ownership plans, influencing its direction and sharing in its profits.

Business Decisions

Choices or resolutions made by the leadership of a company regarding its operations, strategy, and resource allocation.

Social Voice

The capacity of individuals or groups to express opinions, concerns, or demands in a social context, often to influence change or drive awareness.