Penn Inc. needs to borrow $250,000 for the next 6 months. The company has a...
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Penn Inc. needs to borrow $250,000 for the next 6 months. The company has a line of credit with a bank that allows the company to borrow funds with an 10% interest rate subject to a 20% of loan compensating balance. Currently, Penn Inc. has no funds on deposit with the bank and will need the loan to cover the compensating balance as well as their other financing needs. SOLVE THE FOLLOWING PARTS BELOW.
PART A - What will be the total interest amount for this financing?
a) $11,250 b) $8,750 c) $10,000 d) $12,500
PART B - What will be the annual percentage rate, or APR, for this financing?
a) 10% b) 11.25% c) 12.5% d) 8.75%
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