You've worked out a line of credit arrangement that allows you to borrow up to $40 million at any time. The interest rate is 48 percent per month In addition. 5 percent of the amount that you borrow must be deposited in a noninterest-bearing account Assume that your bank uses compound interest on its line of credit loans. What is the effective annual interest rate on this lending arrangement

The effective annual interest rate on this lending arrangement is 10,944.36%.

Explanation:

The effective annual rate (EAR) can be calculated using the following formula:

EAR = ((1 + i)^n) - 1 (1)

Where;

i = Monthly interest rate of the bank = 48%, or 0.48

n = Number of compounding periods in a year = 12

Substituting the values into equation (1), we have:

EAR = ((1 + 0.48)^12) - 1

EAR = 1.48^12 - 1

EAR = 110.443607719612 - 1

EAR = 109.443607719612, or 10,944.3607719612%

Rounding to 2 decimal places, we have:

EAR = 10,944.36%

Therefore, the effective annual interest rate on this lending arrangement is 10,944.36%.

there was no passage listed but using the process of elimination i'd say it was d. the high economy would do the opposite. i don't see how low prices would affect it. high unemployment is possible but i feel d is the better answer.

answer; specific performance;