Effective Annual Interest Rate
You've worked out a line of credit arrangement that allows you borrow up to $70M at any time. The interest rate is .480% per month. In addition , 5% of the amount that you borrow must be deposited in a non interest-bearing account.
Assume that your bank uses compound interest on its line of credit loans.
1) What is the effective annual interest rate on this lending arrangement?
Answer should be: 6.23%
2) Suppose you need $15M today and you repay it in six months -
How much interest will you pay?
Answer: should be: 460,228.73