Answer to Question #329722 in Financial Math for Leyna

Question

At cryptobank a $100,000 loan for one year has a quoted interest rate of 10.50% payable annually but with a compensating balance of 20%. At Mo bank a $100,000 discount loan has a quoted interest rate of 7.90%payable annually. The loan at Mo bank is _____ per year cheaper than at cryptobank

Answer 1

0.1050 $\cdot 0.2 =$ 0.021

0.1050 - 0.021 = 0.084

0.084 - 0.079 = 0.005

by 5%