1. Fancy Footwear has a line of credit with your local bank for $150,000. The loan agreement calls for interest of 10 percent with a 4 percent compensating balance requirement which is based on the total amount borrowed. What is the effective interest rate if you need $128,500 for one year to cover your operating expenses?
10.42 percent
9.95 percent
9.50 percent
10.08 percent
10.33 percent
2. Simple interest is the interest earned on:
a. the original principal amount involved.
b. the reinvested interest from prior periods.
c. both the original principal and the reinvested interest from prior periods.
d. the prior balance which includes both the interest and the principal amounts.
e. the accumulated value of an investment including all interest earned to date.