1. A Bank is willing to lend your company $20,000 for six months at 8% interest, with a 10% compensating balance. What is the effective annual interest rate of the loan?
a) 9.08%
b) 8%
c) 10%
2. A Bank is willing to lend your company $20,000 for six months at 8% interest, with a 10% compensating balance. How much is the compensating balance?
a) $3,000
b) $1,600
c) $2,000
d) $200