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A bank has lent a firm a $200,000 for 60 days at 10% interest. The loan is discounted, and the bank requires a 20% compensating

A bank has lent a firm a $200,000 for 60 days at 10% interest. The loan is discounted, and the bank requires a 20% compensating balance. What is the effective annual rate?

a. 12.76%

b. 10%

c. 10.17%

d. 14.60%

Provide sol.

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