Compensating balance versus discount loan weather's catering supply inc., needs to borrow $151,000 for 6 months. State bank has offered to lend the funds an annual rate of 8.7% subject to a 9.9% compensating balance. (Note: weathers currently maintain $0 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 principle of both loans would be payable at maturity at a single sum.

A. State banks semi annual rate is ____ %

(Round to two decimal places)

State banks effective annual rate is _____%

(Round to two Decimal places)

Frost finance's semi annual rate is _____%

(Round to two decimal places)

Frost finance's effective annual rate is ____%

(Round to two decimal places)

B. What could Weathers do that would reduce the effective annual rate on the state bank loan?