A firm borrows $100,000 from the bank, but has to maintain a compensating balance of $20,000 with the bank.The annual interest rate for the loan is 12%.What is the effective annual rate if the interest is compounded quarterly?
A) 12.03%
B) 13.00%
C) 14.05%
D) 15.87% Effective Annual Rate with Compensating Balances =
Correct Answer:
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