Rachel's Has a $50,000 Line of Credit with Uptown Bank

Rachel's has a $50,000 line of credit with Uptown Bank.The line of credit calls for an interest rate of 8 percent and a compensating balance of 4 percent.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 $35,000 for one year?

A) 7.76 percent
B) 8.00 percent
C) 8.17 percent
D) 8.33 percent
E) 8.42 percent