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DAS,IncHas a Line of Credit with FBT Bank That Allows

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DAS,Inc.has a line of credit with FBT Bank that allows DAS to borrow up to $400,000 at an annual interest rate of 11 percent.However,DAS must keep a compensating balance of 25 percent of any amount borrowed on deposit at the bank.DAS does not normally have a cash balance account with the bank.What is the effective annual cost of credit?


Definitions:

Affiliation Needs

The inherent human desire to belong to a group or form close and interpersonal relationships.

Esteem Needs

Refers to the human desire for respect, self-esteem, and recognition from others, considered a higher-level need in Maslow's hierarchy of needs.

Security Needs

The requirements essential for an individual's or organization's safety, protection, and freedom from threats or harm.

Esteem Needs

In Maslow's hierarchy of needs, these are the fourth level and represent the human desire for respect, self-esteem, and recognition from others.

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