Would It Be Worth It to Incur a Compensating Balance

question 137

Multiple Choice

Would it be worth it to incur a compensating balance of $4,000 in order to get a 1.5-percent-lower interest rate on a 1-year, pure discount loan of $300,000?

• A) Yes, if the interest rate is less than 13.64 percent
• B) No, if the interest rate is less than 13.64 percent
• C) Yes, if the interest rate is more than 1.5 percent
• D) Not enough information is given to determine