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AICPA Exam CPA-Business Topic 1 Question 12 Discussion
Actual exam question for
AICPA's
CPA-Business exam
Question #: 12
Topic #: 1
[All CPA-Business Questions]
Topic #: 1
A company obtained a short-term bank loan of $250,000 at an annual interest rate of 6 percent. As a condition of the loan, the company is required to maintain a compensating balance of $50,000 in its checking account. The company's checking account earns interest at an annual rate of 2 percent.
Ordinarily, the company maintains a balance of $25,000 in its checking account for transaction purposes. What is the effective interest rate of the loan?
Suggested Answer:
A
Choice 'a' is correct. 6.44%. To calculate the effective interest rate:
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