AICPA CPA-Business Exam - Topic 1 Question 11 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 11
Topic #: 1

A company obtained a short-term bank loan of $500,000 at an annual interest rate of eight percent. As a condition of the loan, the company is required to maintain a compensating balance of $100,000 in its checking account. The checking account earns interest at an annual rate of three percent. Ordinarily, the company maintains a balance of $50,000 in its account for transaction purposes. What is the effective interest rate of the loan?

A7.77 percent.

B8.50 percent.

C9.44 percent.

D8.56 percent.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. 8.56%. To calculate the effective annualized percentage cost of financing:

Choices 'a', 'b', and 'c' are incorrect, per the above calculation.

by Laurel at May 07, 2022, 03:30 PM

Limited Time Offer

25%

Off

Get Premium CPA-Business Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Dudley

5 months ago

I thought it would be higher than that, honestly.

upvoted 0 times

...

Marge

6 months ago

Totally, that balance changes everything!

upvoted 0 times

...

Anthony

6 months ago

Wait, how does that affect the effective rate?

upvoted 0 times

...

Micaela

6 months ago

Don't forget the $100,000 compensating balance!

upvoted 0 times

...

Reiko

6 months ago

The loan is $500,000 at 8% interest.

upvoted 0 times

...

Tammara

6 months ago

I'm a bit confused by the output. I'll need to review my understanding of views and how they interact with base tables before I can confidently select an answer.

upvoted 0 times

...

Arleen

6 months ago

I've used the Inbound Shipment Management Tool before, so I think I know the main advantages. I'll select those.

upvoted 0 times

...

Eladia

6 months ago

This seems like a straightforward question about the purpose of information classification. I'll carefully read through the options and select the one that best describes the objective.

upvoted 0 times

...

Lavelle

6 months ago

I remember practicing a similar question about I/O modules and how they connect to fabric interconnects, but this one has specific requirements that throw me off.

upvoted 0 times

...

Yoko

6 months ago

Okay, let me think this through step-by-step. The question is asking about the response code when the requested REST API information cannot be found, and the authenticated user is making the request. Based on that, I believe the correct answer is 404 - Not Found.

upvoted 0 times

...