Morgan Contractors borrowed $2.50 million at an APR of 5.0 percent. The loan called for a compensating balance of 13 percent. What is the effective interest rate on the loan? (Round intermediate calculations to 4 decimal places, e.g. 1.2541 and final answer to 2 decimal places, e.g. 12.25%.) The effective interest rate on the loan is %.
Winegartner Cosmetics management is setting up a line of credit at the company’s bank for $5 million for up to two years. The interest rate is 6.400 percent and the loan agreement calls for an annual fee of 29 basis points on any unused balance for the year. If the firm borrows $2.4 million on the day the loan agreement is signed, what is the effective rate for the line of credit? (Round intermediate calculations to 4 decimal places, e.g. 1.2541 and final answer to 2 decimal places, e.g. 12.25%.)
The firm’s effective rate is %.