In order to finance a shipment of badminton sets,Rujisawa Import-Export is seeking a $500,000 one-year bank loan.The Marine Bank requires that Rujisawa maintain a 20% compensating balance and requires four quarterly payments.The Prairie Bank requires only a 10% compensating balance,but requires 12 monthly payments.In addition,the Prairie Bank discounts the loan.Both banks state that their interest rate is 9%.
A)Which bank has the lowest annual interest rate? (NOTE: deduct the compensating balances from the principal in determining the annual rate.)
B)If Prairie Bank eliminated its compensating-balance requirement,would your answer change?

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The Answer of In order to finance a shipment of badminton sets,Rujisawa Import-Export is seeking a $500,000 one-year bank loan.The Marine Bank requires that Rujisawa maintain a 20% compensating balance and requires four quarterly payments.The Prairie Bank requires only a 10% compensating balance,but requires 12 monthly payments.In addition,the Prairie Bank discounts the loan.Both banks state that their interest rate is 9%.
A)Which bank has the lowest annual interest rate? (NOTE: deduct the compensating balances from the principal in determining the annual rate.)
B)If Prairie Bank eliminated its compensating-balance requirement,would your answer change?

In Order to Finance a Shipment of Badminton Sets,Rujisawa Import-Export