Analog computers needs to borrow $475,000 from the midland bank. the bank requires a 15% compensating balance. how much money will analog need to borrow in order to end up with $475,000 spendable cash

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Business

Nicole Sharp

8 January, 20:44

Analog computers needs to borrow $475,000 from the midland bank. the bank requires a 15% compensating balance. how much money will analog need to borrow in order to end up with $475,000 spendable cash

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Marquise Green · Answer 1

Compensating balance is defined as a minimum balance to be maintained and used to offset cost incurred by a bank for a business loan. So, if analog computers needs to borrow $475,000 from the midland bank and the bank requires a 15% compensating balance; they need to borrow $71,250 (15% of loan amount) plus the actual loan amount of $475,000 to end up with $475,000 spendable cash.