Exhibit Brother's Loan
Your brother has just taken out a loan for $75,000.The stated (simple) interest rate on this loan is 10 percent, and the bank requires him to maintain a compensating balance equal to 15 percent of the initial face amount of the loan.He currently has $20,000 in his checking account, and he plans to maintain this balance.The loan is an add-on installment loan which he will repay in 12 equal monthly installments, beginning at the end of the first month.
-Refer to Exhibit Brother's Loan.What is the nominal annual add-on interest rate on this loan?

Question

Quizplus · Accepted Answer

The Answer of Exhibit Brother's Loan
Your brother has just taken out a loan for $75,000.The stated (simple) interest rate on this loan is 10 percent, and the bank requires him to maintain a compensating balance equal to 15 percent of the initial face amount of the loan.He currently has $20,000 in his checking account, and he plans to maintain this balance.The loan is an add-on installment loan which he will repay in 12 equal monthly installments, beginning at the end of the first month.
-Refer to Exhibit Brother's Loan.What is the nominal annual add-on interest rate on this loan?

Exhibit Brother's Loan Your Brother Has Just Taken Out a Loan for $75,000.The