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A12. (Cost of bank loan) A bank loan agreement calls for an interest rate equal to prime rate plus 1%.

A12. (Cost of bank loan) A bank loan agreement calls for an interest rate equal to prime rate plus 1%.A12. (Cost of bank loan)
Individual assignment: Text Problem Set

Corporate Financial Management (3rd Edition)
Emery, Douglas R., Finnerty, John D., & Stowe, John D. (2007)

A12. (Cost of bank loan) A bank loan agreement calls for an interest rate equal to prime rate plus 1%. If prime rate averages 9% and non-interest-earning compensating balances equal to 10% of the loan must be maintained, what are the APR and the APY of the loan assuming annual payments?           

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