A firm pays a stated interest rate of 11% on a $250,000 loan for one year. It is also required to keep a 12% compensating balance. The firm always keeps at least a $25,000 balance in its checking account even when no compensating balances are required. Calculate the effective interest rate.
A) 14.29%
B) 11%
C) 12.5%
D) 11.22%
Correct Answer:
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