Posted: September 22nd, 2016

Randall Corporation plans to borrow $200,000 for one year at 12 percent from the Waco State Bank.

. Randall Corporation plans to borrow $200,000 for one year at 12 percent from the Waco State Bank. There is a 20 percent compensating balance requirement. Randall Corporation keeps minimum transaction balances of $10,000 in the normal course of business. This idle cash counts toward meeting the compensating balance requirement. What is the effective rate of interest?