Carey Company is borrowing $175,000 for one year at 8.5 percent from Second Intrastate Bank. The bank requires a 18 percent compensating balance. The principal refers to funds the firm can effectively utilize (Amount borrowed Compensating balance). a.What is the effective rate of interest?(Use a 360-day year.Inputyouransweras a percent rounded to 2 decimal places.)

b.What would the effective rate be if Carey were required to make 12 equalmonthlypayments toretirethe loan?(Use a 360-day year.Input your answer as a percent rounded to 2 decimal places.)

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