Problem:
Your company plans to borrow $8 million for 12 months, and your banker gives you a stated rate of 12% interest. You would like to know the effective rate of interest for the following types of loans. (each part stands alone)
a.) Simple 12% interest with a 10% compensating balance.
b.) Discounted interest.
c.) An installment loan (12 payments)
d.) Discounted interest with a 5% compensating balance.
Note: Show supporting computations in good form.