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A bank lends a firm $1,000,000 for one year at 12.5% on a discounted basis and requires compensating balances of 10 percent of the face

A bank lends a firm $1,000,000 for one year at 12.5% on a discounted basis and requires compensating balances of 10 percent of the face value of the loan. Assume 360 days in a year. Estimate the effective annual interest rate associated with this loan

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