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Business, 07.11.2019 07:31 Geo777

(estimating the cost of bank credit) paymaster enterprises has arranged to finance its seasonal working-capital needs with a short-term bank loan. the loan will carry a rate of 1616 percent per annum with interest paid in advance (discounted). in addition, paymaster must maintain a minimum demand deposit with the bank of percent of the loan balance throughout the term of the loan. if paymaster plans to borrow $120 comma 000120,000 for a period of 44 months, what is the effective cost of the bank loan? hint: assume the paymaster does not have sufficient funds in the bank to satisfy the compensating balance requirement.

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