recurring issues of commercial paper all year long. You recently approached your bank about establishing a credit line facility. The terms offered by your bank include a nominal rate of prime + 1.5 percent (prime is currently 5 percent) on the amount borrowed, a commitment fee of 25 basis points on the unused portion of the credit line, and a compensating balance of 10 percent on the amount borrowed. You decide to establish the line for $75 million. Over the course of a year, you anticipate the average amount borrowed to be $55 million. Your firm keeps no balances at the bank paying fees for all cash management services. a. Estimate the cost of the credit line. b. Assume that the firm did have cash balances to cover the required compensating balances resulting from the credit line borrowings. Estimate the effective cost of the credit line. 5. As treasurer of your firm, you wish to establish a credit lime é