Question: Effective Interest Rate and Compensating Balance. Wilson Corporation has a credit line of $800,000. The compen

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Question: Effective Interest Rate and Compensating Balance. Wilson Corporation has a credit line of $800,000. The compen

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Question:
Effective Interest Rate and Compensating Balance. Wilson
Corporation has a credit line of $800,000. The compensating balance
requirement on outstanding loans is 14 percent, and 8 percent on
the unused credit line. The company borrows $500,000 at a 20
percent interest rate. (a) What is the required compensating
balance? (b) What is the effective interest rate?
Please do not copy from answers. Otherwise I have to report the
answer.
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