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Suppose your firm is seeking a six-year, amortizing $790,000 loan with annual payments and your bank is offering you the choice between a $839,000 loan with a $49,000

Suppose your firm is seeking a six-year, amortizing $790,000 loan with annual payments and your bank is offering you the choice between a $839,000 loan with a $49,000 compensating balance and a $790,000 loan without a compensating balance. The interest rate on the $790,000 loan is 9.0 percent.

How low would the interest rate on the loan with the compensating balance have to be for you to choose it?

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