Cost of Borrowing. You've worked out a line of credit arrangements that allow you to borrow up to $50 million at any time. The interest rate is 53 percent per month. Also, 5 percent of the amount that you borrow must be deposited in a non-interests-bearing account.Assume that your bank uses compound interest on its line of credit loans.
a. What is the effective annual interest rate on this lending arrangement?
b. Suppose you need $15 million today and you repay it in six months. How much interest will you pay?