The Toy Store Borrowed $12,000 from the Bank and Agreed

question 170

Multiple Choice

The Toy Store borrowed $12,000 from the bank and agreed to keep $3,000 on deposit at all times. The net result of this compensating balance agreement is that:

• A) the Toy Store actually only borrowed $9,000.
• B) the Toy Store actually only borrowed $3,000.
• C) the actual interest rate is lower than the stated interest rate.
• D) none of the above are true.

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