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You Have Just Taken Out a Loan for $75,000

question 12

Multiple Choice

You have just taken out a loan for $75,000. The stated (simple) interest rate on this loan is 10 percent, and the bank requires you to maintain a compensating balance equal to 15 percent of the initial face amount of the loan. You currently have $20,000 in your checking account, and you plan to maintain this balance. The loan is an add-on installment loan which you will repay in 12 equal monthly installments, beginning at the end of the first month.
-Suppose you borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan) . Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?

Definitions:

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The tension and struggle between genders, often arising from differences in societal roles, power inequality, and individual rights.

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Friedrich Engels was a 19th-century German philosopher, social scientist, and author, who co-developed Marxist theory with Karl Marx.

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