Smithfield's Has a Line of Credit with a Local Bank

Smithfield's has a line of credit with a local bank of $75,000.The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed.What is the effective interest rate if the firm needs $58,000 for 1 year to finance a fixed asset purchase?

A) 8) 55%
B) 6) 34%
C) 7) 13%
D) 7) 38%
E) 6) 19%