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# 4) Calculate the effective annual percentage rate of forgoing

### Resolved Question:

4) Calculate the effective annual percentage rate of forgoing the cash discount under each of the following credit terms;A) 2/10, net 60. B)2/10, net 30.7) Pyramid Co. has a revolving credit agreement with the bank. They can barrow \$1million under the agreement at an annual interest rate of 9%. They are requirewd to maintain a 10% compensating balance on any funds barrowed under the agreement & to pay a 0.5% commitment fee on the unused portion of the credit line. Assume they have no funds in the account that can be used to meet the compensating balance required. Determine the annual financing cost of barrowing each of the following amounts under the credit agreement; a)\$250,000, b)\$500,000, c) \$1,000,000.
Submitted: 8 years ago.
Category: Homework
Expert:  Neo replied 8 years ago.