Tangshan Mining borrowed $100,000 for one year under a revolving credit agreement that authorized and guaranteed the firm access to $200,000. The revolving credit agreement had a stated interest rate of 7.5 percent and charged the firm a one percent commitment fee on the unused portion of the agreement. Based on this information, the effective annual interest rate on the loan was
A. 7.5%.
B. 8.0%.
C. 8.5%.
D. 9.0%.
Answer:C
Tangshan Mining borrowed $100,000 for one year under a revolving credit agreement that authorized and guaranteed the firm access to $200,000. The revolving credit agreement had a stated interest rate of 7.5 percent and charged the firm a one percent commitment fee on the unused portion of the agreement. Based on this information, the effective annual interest rate on the loan was
A. 7.5%. B. 8.0%. C. 8.5%. D. 9.0%.