    LOAN RATE WITH COMPENSATING BALANCE                                         
                                                                                
WHEN A BUSINESSMAN BORROWS MONEY FROM A BANK HE IS SOMETIMES                    
REQUIRED TO KEEP A COMPENSATING BALANCE IN THE ACCOUNT.                         
A COMPENSATING BALANCE IS AN AMOUNT THAT THE BUSINESSMAN                        
PAYS INTEREST ON(AS HE HAS BORROWED IT) BUT WHICH HE                            
CANNOT WITHDRAW FROM HIS ACCOUNT. IF A 15% COMPENSATING                         
BALANCE IS REQUIRED,E.G. THIS MEANS THAT FOR EVERY $1,000                       
BORROWED THE BUSINESSMAN CAN ONLY WRITE CHECKS FOR $850.                        
THIS IS ONE METHOD A BANK USES TO RAISE THE EFFECTIVE INTEREST                  
RATE ON A LOAN. THE NOMINAL RATE ,IN THIS CASE, IS LOWER                        
THAN THE 'TRUE' EFFECTIVE RATE.                                                 
                                                                                
PRESS ENTER TO BEGIN?                                                           
INPUT PROCEEDS OF LOAN IN $            ? 123456.78                              
INPUT COMPENSATING BALANCE %           ? 3.45                                   
NOMINAL INTEREST RATE ON LOAN(%)       ? 6.78                                   
NORMAL ACCOUNT BALANCE WITH NO LOAN   $? 34567.89                               
                                                                                
NOMINAL COMPENSATING BALANCE AMOUNT          $0.00                              
TRUE COMPENSATING BALANCE AMOUNT     -$34567.89                                 
AVAILABLE FUNDS FROM LOAN     $153765.41                                        
EFFECTIVE INTEREST RATE             5.44%                                       
                                                                                
PRESS ENTER FOR MORE COMPUTATION? -1                                            
