Smith Enterprise Credit Line (W/o Comp)

question 42

Multiple Choice

Smith Enterprise Credit line (w/o comp)
Smith Enterprise has an one year credit line of $5,000,000 with Second Bank. On average Smith uses $3,250,000 of the credit line. Second Bank charges a .45% commitment fee on the unused portion of the line and the interest rate is set at LIBOR +1.5%. Assume that the LIBOR is 6.3%

-What is Smith's effective borrowing rate?

• A) 8.45%
• B) 7.59%
• C) 8.04%
• D) 7.80%

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Definitions:

Reagents

Chemicals or substances infused into a system to trigger a chemical reaction or to verify the occurrence of a reaction.

Transformation

A process by which one thing changes into another, often applied in the context of mathematical functions, biological metamorphosis, or data manipulation.

Benzophenone

An organic compound with the formula (C6H5)2CO, often used as a photoinitiator or to perfume soaps.

Alkene

A hydrocarbon that contains at least one carbon-carbon double bond, characterized by the general formula CnH2n and playing a vital role in organic synthesis.