Crawley, Inc

Subject:AccountingPrice:2.87 Bought7

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Crawley, Inc. has a line of credit with HNC Bank that allows the company to borrow up to $800,000 at an interest rate of 12 percent. However, Crawley, Inc. must keep a compensating balance of 18% of any amount borrowed on deposit at the bank. Crawley, Inc. does not normally keep a cash balance account with HNC Bank. What is the effective annual cost of credit?

A) 12.40%

B) 12.83%

C) 14.63%

D) 15.47%