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fixed commitment

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solution


Question

In exchange for a $400 million fixed commitment line of credit, your firm has agreed to do the following;Pay 2.1% quarter on any funds actually borrowed.;Maintain a 4 % compensating balance on any funds actually borrowed.;Pay an up-front commitment fee of 0.15% percent of the amount of the line.;Based on the information above answer the following;a. Ignoring the commitment fee, what is the effective annual interest rate on this line of credit?;b. Suppose your firm immediately uses $130 million of the line and pays it off in one year. What is the effective annual interest rate on this $130 million loan?

 

Paper#81362 | Written in 18-Jul-2015

Price : $22
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