Assignment Loan Scenarios

Midland Chemical Co. is negotiating a loan from Manhattan Bank and Trust. The

small chemical company needs to borrow $500,000.


The bank offers a rate of 8¼ percent with a 20 percent compensating balance

requirement, or as an alternative, 9¾ percent with additional fees of $5,500 to cover

services the bank is providing. In either case the rate on the loan is floating (changes as

the prime interest rate changes), and the loan would be for one year.
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