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CTP · Question #543
(Topic 6) A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance…
The correct answer is C. 55. See the full explanation below for the reasoning.
Question
- (Topic 6)
A company has a $2 million line of credit requiring a 5% compensating balance on usage. For the next year, the company projects a usage of 75% and a 10.375% interest rate. If the balance requirement is eliminated, by how many basis points will the company's effective interest rate be reduced?
Options
- A18
- B30
- C55
- D74
How the community answered
(33 responses)- A12% (4)
- B3% (1)
- C79% (26)
- D6% (2)
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