Business Assignment- Annual interest rate

Business Assignment- Annual interest rate

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following:

> Pay 2.1% quarter on any funds actually borrowed. 
> Maintain a 4 % compensating balance on any funds actually borrowed.
> Pay an up-front commitment fee of 0.15% percent of the amount of the line. 

Based on the information above answer the following: 
a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit? 
b. Suppose your firm immediately uses $130 million of the line and pays it off in one year. What is the effective annual interest rate on this $130 million loan?

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