Crimini Foods is offered a $400,000 line of credit for six months at an APR of 10%. This loan has a loan origination fee of 2%. What is the actual six-month interest rate paid, expressed as an EAR?

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D) Origination fee = 0.02 × ($400,000) = $8000 Loan amount = $400,000 - $8000 = $392,000 Interest paid = $20,000 Semiannual interest rate = $420,000 / $392,000 = 1.0714 EAR = (1.0714² - 1) = 14.80%

Crimini Foods Is Offered a $400,000 Line of Credit for Six