DAS, Inc has a line of credit with FBT Bank that allows DAS to borrow up to $400,000 at an annual
interest rate of 11 percent. However, DAS must keep a compensating balance of 25 percent of any
amount borrowed on deposit at the bank.
DAS does not normally have a cash balance account with
the bank. What is the effective annual cost of credit?
A) 12.59% B) 11.45% C) 16.00% D) 14.67%
D
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Indicate whether the statement is true or false a. True b. False
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Answer the following statement true (T) or false (F)
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What will be an ideal response?