What is the effective annual interest rate on the loan

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Faircross Farms harvests its crops four times annually and receives payment for its crop 3 months after it is picked and shipped. However, planting, irrigating, and harvesting must be done on a nearly continual schedule. The firm uses 3-month bank notes to finance its operations. The firm arranges an 11 percent discount interest loan with a 20 percent compensating balance four times annually. What is the effective annual interest rate on the loan? Note that the 11 percent stated interest rate is per year.

Reference no: EM13943303

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