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

question 42

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 a balance of about $10,000 in its checking account. Based on this information, the effective annual interest rate on the loan was ________ percent.

• A) 7.89%
• B) 8.05%
• C) 8.89%
• D) 7.29%

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Definitions:

Process Spread

Refers to the variability or range of values within a process, often analyzed to assess the process's capability and stability.

Normally Distributed

Describes a dataset that follows a Gaussian distribution, with most data points clustering around the mean and symmetrical tails.

Control Chart

A tool used in statistical quality control to monitor a process and determine whether it is in a state of statistical control.

Compressive Strength

The capacity of a material or structure to withstand loads tending to reduce size, measured by the maximum stress that a material can sustain under compression.