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Effective interest rate on the loan

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1. Holland Construction Co. has an outstanding 180-day bank loan of $400,000 at an annual interest rate of 9.5%. The company is required to maintain a 15% compensating balance in its checking account. What is the effective interest rate on the loan? Assume the company would not normally maintain this average amount.

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Effective interest rate = Interest paid/Actual amount used
Interest ...

Solution Summary

The solution explains how to calculate the effective interest rate on the loan.

$2.19