Barkely's has a line of credit with a local bank in the amount of $125,000. The loan agreement calls for interest of 8% with a compensating balance of 4%, which is based on the total amount
Borrowed. The compensating balance will be deposited into an interest-free account. What is the
Effective interest rate on the loan if the ﬁrm needs to borrow $58,000 for one year to cover
Operating expenses?

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The Answer of Barkely's has a line of credit with a local bank in the amount of $125,000. The loan agreement calls for interest of 8% with a compensating balance of 4%, which is based on the total amount
Borrowed. The compensating balance will be deposited into an interest-free account. What is the
Effective interest rate on the loan if the ﬁrm needs to borrow $58,000 for one year to cover
Operating expenses?

Barkely's Has a Line of Credit with a Local Bank