My company needs $300,000 to take a cash discount of 2/10, net 70

a. What is the effective rate on the bank loan?

The amount borrowed is 300,000. Interest is 5,500 for 60 days. Using the simple interest formula
Interest = Principal X Rate X Time
5,500=300,000 X Rate X 60/360
Rate = 11%

b. How much would it cost (as a percentage) I the company did not take the cash discount, but paid the bill in 70 days rather than 10 days?

The formula for finding the cost of not taking the cash discount is
% cost = %discount/(100-% discount) X 360/(Payment Days - Discount Period)
Here
% discount = 2
Payment Days = 70
Discount Period = 10
% cost = 2/98 X 360/60=12.24%

c. Should the company borrow the money to take the discount?

Since the bank rate at 11% is lower than the cost of not taking the discount, the company should borrow and take the discount

d. If the banker requires 20% compensating balance, how must the firm borrow to end up with $300,000?

With 20% compensating balance, the amount to be borrowed is 300,000/.8=375,000. 20% of 375,000=75,000 and the balance is 300,000.