2. Beximco Industries has a line of credit at Bank Two that requires it to pay 13% interest on its borrowing and to maintain a compensating balance equal to 40% of the amount borrowed. The firm has borrowed $8000000 during the year under the agreement. Calculate the effective annual rate on the firms borrowing in each of the following circumstances:

a. The firm normally maintains no deposit balances at Bank Two. b. The firm normally maintains $700000 in deposit balances at Bank Two.

c. The firm normally maintains $1500000 in deposit balances at Bank Two but paid the interest in advance.

d. Compare, contrast, and discuss your findings in parts a, b, and