The choice between a 310000 loan with a 10000 compensating


Suppose your firm is seeking a five year, amortizing $300,000 loan with annual payments and your bank is offering you the choice between a $310,000 loan with a $10,000 compensating balance and a $300,000 loan without a compensating balance. The interest rate on the $300,000 loan is 10.0 percent.

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Financial Management: The choice between a 310000 loan with a 10000 compensating
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