Tangshan Mining Borrowed $100,000 for One Year Under a Line

question 65

Multiple Choice

Tangshan Mining borrowed $100,000 for one year under a line of credit with a stated interest rate of 7.5 percent and a 15 percent compensating balance. Normally, the firm keeps almost no money in its checking account. Based on this information, the effective annual interest rate on the loan is ________.

• A) 7.5%
• B) 8.0%
• C) 8.8%
• D) 7.2%

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Definitions:

Saving

Refers to the portion of income that is not spent on consumption but rather put aside for future use, often in a deposit account or as an investment.

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The changes in health status or quality of life that result from the delivery of healthcare services or intervention.

Ziggurat

In ancient Mesopotamian architecture, a tiered platform for a temple.

Persepolis

An ancient ceremonial capital of the Persian Empire, located in modern-day Iran, known for its vast array of monumental buildings.