1. (7 points) Thompson Corporation is negotiating with First Midwest Bank for a $500,000,1 year loan. First Midwest has offered Thompson the following alternatives: A. A 12 percent annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year. B. A 9 percent annual rate on a simple interest loan, with a 20 percent compensating balance required and interest due at the end of the year. C. An 8.75 percent annual rate on a discounted loan, with a 15 percent compensating balance. D. An 8 percent installment loan repayable in 12 monthly payments, with no compensating balance required. Interest is figured at 8 percent of the $500,000 amount. Required: A. Calculate the effective annual interest rate for each alternative. Show all alculations. B. Which alternative should Thompson accept? Why