Analog Computers needs to borrow $475,000 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 $475,000 spendable cash?
A) $546,250
B) $758,264
C) $558,824
D) $71,250

Question

Quizplus · Accepted Answer

To end up with $475,000 in spendable cash when a 15% compensating balance is required, Analog Computers must borrow an amount such that 85% (100% - 15%) of the borrowed amount equals $475,000. To find this amount, divide $475,000 by 0.85, which equals $558,824.

Analog Computers Needs to Borrow $475,000 from the Midland Bank