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My fernandez has applied for a revolving credit line of $6 million to assit in marketing a new product line.

My fernandez has applied for a revolving credit line of $6 million to assit in marketing a new product line.. Terms of loan are as follows
a) will not be a discount loan
b) commitment fee of 0 percent on the unused portion of the loan will be charged
c) no compensatory balance requirements
d) bank will pay 4 percent interst on demand deposits
e) rate of interest to be charged will be the prime rate, 10%, plus 3%
Loan officer estimates Mr. fernandez will use 60% of credit line. The required reserve ratio on demand is 20 percent


Compute effective cost to Mr. Fernandez



a.14.7%
b.14.9%
c. 15.3%

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