Fin419 Principles of Managerial Finance:  Problem 15–9 Effective Annual Rate

Fin419 Principles of Managerial Finance: Problem 15–9 Effective Annual Rate

Fin419 Principles of Managerial Finance

Problem 15–9 Effective Annual Rate
A financial institution made a $10,000, 1-year loan at 10% interest, requiring a compensating balance equal to 20% of the face value of the loan.
Determine the effective annual rate associated with this loan.
Note: Assume that the firm currently maintains $0 on deposit in the financial institution.
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