Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. compensating balance versus discount loan weathers

Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000 for 6...

60.1K

Verified Solution

Question

Finance

image

Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $154,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 9.5% subject to a 9.8% compensating balance. (Note: Weathers currently maintains $0 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 9.5% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate the effective annual rate of interest on each loan. b. What could Weathers do that would reduce the effective annual rate on the State Bank loan? a. State Bank's semi-annual rate is L %. (Round to two decimal places.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students