1. X Bank offers A Company a P500,000 line of credit with an interest rate...
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Accounting
1. X Bank offers A Company a P500,000 line of credit with an interest rate of 2.75% per quarter. The credit line also requires that 2% of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. A company's short-term investments are paying 1.75% per quarter. Assume any funds borrowed or invested use compound interest
What is the effective annual interest rate in the following situation: (Round off to 2 decimals) 1. If the credit goes unused all year? 2. If the company borrows the entire P500,000 for one year?
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