Problem:
A company plans to borrow $2 million for a year. The stated interest rate is 12 percent. Compute the effective interest rate under each of these assumptions. Each part stands alone.
a. The interest is discounted.
b. There is a 20 percent compensating balance requirement.
c. It is a 12-month installment loan.
d. Assume the interest is only $45,000 and the loan is for 90 days.