You’ve worked out a line of credit arrangement that allows you to borrow up to $60 million at any time. The interest rate is .579 percent per month. In addition, 5 percent of the amount that you borrow must be deposited in a noninterest-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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Effective annual rate %
b. Suppose you need $19.95 million today and you repay it in seven months. How much interest will you pay?