Clicker Corporation must raise $50,000 to support

operations for the next 12 months. Clicker

buys from its suppliers on terms of 2.5/20, net

80, and it normally pays on Day 20 to take the

cash discounts, but it could forgo the discounts

and pay on Day 90 to get the needed amount in

the form of nonfree trade credit. Alternatively,

Clicker can borrow form its bank using a oneyear

discount interest loan that has a 12 percent

quoted interest rate and requires a 15 percent

compensating balance. Clicker normally maintains

a negligible deposit at the bank. What is

the EAR of the lower cost source? Assume the

face value of the bank loan is $50,000.