Summit Record Company is negotiating with two banks for a $150,000 loan. Fidelity Bank requires a compensating balance of 26 percent, discounts the loan, and wants to be paid back in four quarterly payments. Southwest Bank requires a compensating balance of 13 percent, does not discount the loan, but wants to be paid back in 12 monthly installments. The stated rate for both banks is 12 percent. Compensating balances will be subtracted from the $150,000 in determining the available funds in part a. a-1. Calculate the effective interest rate for Fidelity Bank and Southwest Bank.

The former chairman of the federal reserve, alan greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. stock market indexes such as the s& p composite price index were at an all-time high. some commentators believed that the fed should intervene to slow the expansion of the economy. why would central banks want to clamp down when the economy is growing? a. to block the formation of unsustainable speculative asset bubbles. b. to curtail excessive profits in the banking system. c. to prevent inflationary forces from gathering momentum. d. all of the above. e. a and c only.