A bank lends a firm $1,000,000 for one year at 12 percent on a discounted basis and requires compensating balances of 10 percent of the face value of the loan. The effective annual interest rate associated with this loan is

12 percent

13.3 percent

13.6 percent

15.4 percent

By offering credit to customers, the firm may

increase the price of the good to cover its costs

decrease its investment in accounts receivable

decrease its investment in accounts payable

decrease the cost of goods purchased

A bank lends a firm $500,000 for one year at 8 percent and requires compensating balances of 10 percent of the face value of the loan. The effective annual interest rate associated with this loan is

8.9 percent

8 percent

7.2 percent

7.0 percent