A firm borrows $192,000 from a bank for 3 months but has to maintain a compensating balance of $18,000 with the bank. The annual interest rate for the loan is 10.50% (APR). What is the effective annual interest rate on the loan?

a.

15.73%

b.

11.59%

c.

9.31%

d.

2.90%

e.

12.10%