CTP Exam Dumps | A company has negotiated a credit facility with the following terms: -$5,000,000 line of credit -$3,000,000

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Question 259/279

A company has negotiated a credit facility with the following terms:
-$5,000,000 line of credit -$3,000,000 average borrowing -30 basis point commitment fee on unused portion of line -Interest rate on advances is 1-month LIBOR plus 4% -1-month LIBOR is currently 2% -Compensating balance requirement of 20% on the outstanding borrowings
What is the effective annual borrowing rate for the line of credit?

A. 6.0%

B. 9.3%

C. 7.8%

D. 6.2%

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