The Sports Store Has a $100,000 Line of Credit with City

The Sports Store has a $100,000 line of credit with City Bank. The loan agreement requires that 2 percent of the unused portion of the credit line be deposited in a non-interest bearing account as a compensating balance. The interest rate on the borrowed funds is 1.4 percent per quarter. The Sport Store's short-term investments are paying 1.5 percent per quarter. What is the effective annual interest rate on the line of credit if The Sports Store borrows the entire $100,000 for one year? Assume any funds borrowed or invested use compound interest.

A) 5.72 percent
B) 5.76 percent
C) 6.00 percent
D) 6.08 percent
E) 6.14 percent