The Rosewood Corporation established a line of credit with a local bank.The maximum amount that can be borrowed under the terms of the agreement is $500,000 at a rate of 10 percent.A compensating balance averaging 15 percent of the loan is required.Prior to the agreement,Rosewood had maintained an account at the bank averaging $25,000.Any additional funds needed for the compensating balance will also have to be borrowed at the 10 percent rate.If the firm needs $280,000 for 6 months,what is the annual cost of the loan?

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The Answer of The Rosewood Corporation established a line of credit with a local bank.The maximum amount that can be borrowed under the terms of the agreement is $500,000 at a rate of 10 percent.A compensating balance averaging 15 percent of the loan is required.Prior to the agreement,Rosewood had maintained an account at the bank averaging $25,000.Any additional funds needed for the compensating balance will also have to be borrowed at the 10 percent rate.If the firm needs $280,000 for 6 months,what is the annual cost of the loan?

The Rosewood Corporation Established a Line of Credit with a Local