Analog Computers needs to borrow $800,000 from the Midland Bank.The bank requires a 15% compensating balance.How much money will Analog need to borrow in order to end up with $800,000 spendable cash?
A) $920,000.
B) $1,058,264.
C) $941,177.
D) $800,000.

Question

Quizplus · Accepted Answer

To end up with $800,000 spendable cash, Analog Computers needs to borrow the amount equal to $800,000/0.85 (since the bank requires 15% as a compensating balance). 
So, the amount Analog needs to borrow = $941,176.47 
Hence, the correct choice is C.

Analog Computers Needs to Borrow $800,000 from the Midland Bank