Page 95 - DBP5043
P. 95
CALCULATE THE EFFECTIVE COST OF
SHORT TERM LOAN
TOTAL LOAN REQUIRE
Cause of loan have to be deduct by compensating balance and
interest, so total loan require not achieve amount that required by a
company. Company have to calculate the total loan required by a
company.
Simple interest
Total loan require =
1−%
Example 10
Sharina wishes to borrow RM 20,000 for one year. The bank offers a
simple interest loan at 14% per annum and requires Sharina to
maintain a compensating balance of 20% of the loan amount.
Calculate total loan require by Sharina.
Discount interest
Example 11
Sharina wishes to borrow RM 20,000 for one year. The bank offers a
discount interest loan at 14% per annum and requires Sharina to
maintain a compensating balance of 20% of the loan amount.
Calculate total loan require by Sharina.
Total loan require =
1−% −% 
