# 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.

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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