Transcribed Image Text
In exchange for a $400 million fixed commitment line of credit,your firm has agreed to do the following: Pay 1.84 percent perquarter on any funds actually borrowed. Maintain a 2 percentcompensating balance on any funds actually borrowed. Pay anup-front commitment fee of 0.29 percent of the amount of the line.Based on this information, answer the following:a. Ignoring the commitment fee, what is the effective annualinterest rate on this line of credit? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2decimal places, e.g., 32.16.)Effective annual rate %b. Suppose your firm immediately uses $214 million of the lineand pays it off in one year. What is the effective annual interestrate on this $214 million loan? (Do not round intermediatecalculations and enter your answer as a percent rounded to 2decimal places, e.g., 32.16.)Effective annual rate %