Gifts Galore Inc. borrowed $1.9 million from National City Bank. The loan was made at a simple annual interest rate of 14% a year for 3 months. A 20% compensating balance requirement raised the effective interest rate. Do not round intermediate calculations. Round your answers to two decimal places.
The nominal annual rate on the loan was 11.75%. What is the true effective rate?
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What would be the effective cost of the loan if the note required discount interest?
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What would be the nominal annual interest rate on the loan if the bank did not require a compensating balance but required repayment in three equal monthly installments?
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