Marshall's Has a $75,000 Line of Credit with Tabor Bank

Marshall's has a $75,000 line of credit with Tabor Bank. The line of credit calls for an interest rate of 8.5% and a compensating balance of 6%. The compensating balance is based on the total amount borrowed and will be held in an interest-free account. What is the effective annual interest rate if the firm borrows $49,000 for one year?

A) 8.28%
B) 8.78%
C) 9.04%
D) 9.23%
E) 9.31%