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Find the effective annual interest rate

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Question - A bank lends a firm P5,000,000 for one year at 12 percent on a discounted basis and requires compensating balances of 10 percent of the face value of the loan. Find the effective annual interest rate associated with this loan?

a. 6.41 percent.

b. 7.69 percent.

c. 6.67 percent.

d. 15.38 percent.

Reference no: EM132769874

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