Pacific Automotive has a $150,000 compensating balance loan with its bank.The terms of the loan call for Pacific to keep 8% of the loan as a compensating balance and pay interest at an annual rate of 5.50% on the entire amount.If the firm borrows the maximum amount for one year,what is the EAR on this loan?
A) 5.98%
B) 6.07%
C) 6.22%
D) 7.22%
Correct Answer:
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