Smithfield's Has a Line of Credit with a Local Bank

question 72

Multiple Choice

Smithfield's has a line of credit with a local bank of $50,000.The loan agreement calls for interest of 9 percent with a 5 percent compensating balance requirement that is based on the total amount borrowed.What is the effective interest rate if the firm needs $45,000 for one year to finance a fixed asset purchase?

• A)8.55%
• B)9.00%
• C)9.13%
• D)9.38%
• E)9.47%

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Definitions:

Isomeric Alkanes

Alkanes that have the same molecular formula but differ in the structural arrangement of their atoms.

Long-chain Alkanes

Hydrocarbons that consist of a long sequence of carbon atoms bonded together with hydrogen atoms, used in various fuel and lubricant applications.

Reaction Process

The series of steps that lead to the conversion of reactants into products during a chemical reaction, including all intermediate forms and mechanisms.

Cyclopentane

A cyclic alkane with the formula C5H10, characterized by a ring of five carbon atoms.