________ effectively raises the interest cost to the borrower on a line of credit.
A) An operating change restriction
B) An annual cleanup
C) A compensating balance
D) A commitment fee

Question

Quizplus · Accepted Answer

A compensating balance effectively raises the interest cost to the borrower because it requires the borrower to maintain a minimum balance in their account, which reduces the amount of usable funds and increases the effective interest rate on the borrowed funds.

________ Effectively Raises the Interest Cost to the Borrower on a Line