Compensating balance versus discount loan Weathers Catering Supply, Inc., needs to borrow $145,000 for 6 months. State Bank has offered to lend the funds at an annual rate of 8.7% subject to a 9.6% compensating balance. (Note: Weathers currently maintains 50 on deposit in State Bank.) Frost Finance Co. has offered to lend the funds at an annual rate of 8.7% with discount-loan terms. The principal of both loans would be payable at maturity as a single sum. a. Calculate the effective annual rate of interest on each loan. b. What could Weathers do that would reduce the effective annual rate on the State Bank loan