William Miklo is opening a new business and the bank will not give him a loan without a 20% compensating balance account. He needs $50,000 at 15% interest for one year and they want their interest in advance. What is the real interest rate they are charging him?© BrainMass Inc. brainmass.com March 4, 2021, 11:20 pm ad1c9bdddf
Though the borrower is paying interest on a compensating balance, he or she does ...
This solution illustrates how to compute the effective interest rate for a business loan with a compensating balance.