Crawley, inc
Subject:BusinessPrice:2.87 Bought7
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 they must keep a company's sting balance of 18 percent of any amount borrowed on deposit at the bank. They do not normally keep a cash balance account with hnc bank. What is the effective annual cost of credit. A. 15.47. B. 12.4. C. 14.63. D. 12.83
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Answer:
Effective annual cost of credit = [Interest rate/ (100 - Deposit Rate)] x 100
= [12 /(100 - 18)] x 100
= 14.63
