A bank lends a firm $1,000,000 for one year at 12 percent on a discoun
A bank lends a firm $1,000,000 for one year at 12 percent on a discounted basis and requires compensating balances of 10 percent of the face value of the loan. The effective annual interest rate associated with this loan is ________.
A) 12 percent
B) 13.3 percent
C) 13.6 percent
D) 15.4 percent
ANSWER
D
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