Читать книгу Fundamentals of Financial Instruments - Sunil K. Parameswaran - Страница 125

Many banks require borrowers to keep a percentage of the loan amount as a deposit with them. Such deposits, referred to as compensating balances, earn little or no interest. Obviously such requirements will increase the effective rate of interest, and the higher the required balance, the greater will be the rate of interest that is paid by the borrower.

Assume that in Michael's case, the bank required a compensating balance of 12.50%. So while he will have to pay interest on the entire loan amount of $8,000, the usable amount is only $7,000.

The effective rate of interest is: