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What is the effective interest rate for this loan

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Question - Norman's Lamps secures a loan $250,000 from their bank with an interest rate of 5%. Their bank requires Norman's Lamps to maintain a $50,000 compensating balance at all times in a checking account with the bank. What is the effective interest rate for this loan?

a. 3.75%

b. 7.5%

c. 6.25%

d. 5%

Reference no: EM132527492

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