A firm needs full use of 2000000 to purchase a new machine, Financial Management

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A firm needs full use of 2000000 to purchase a new machine

A firm needs full use of $2,000,000 to purchase a new machine. A bank has agreed to loan at 9% discounted interest for 180 days. The bank requires a .25% compensating balance. The bank charges fees in advance of $300.

A) How much will the firm need to borrow?

B) What will be the effective annual rate on the loan?

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Financial Management: A firm needs full use of 2000000 to purchase a new machine

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