Cost of Bank Loans

Cost of Bank Loans Del Hawty, owner of Hawley's Hardware, is negotiating with First City Bank for a year loan of $100,000. First City has offered Hawley the alternatives listed below. Calculate the effective annual interest rate for each alternative. Do not round Intermediate calculations. Round your answers to two decimal places a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year 12 b. A9% annual rate on a simple interest toon, with a 20% compensating balance required and interest due at the end of the year. 11.25 C.A 8.75% annual rate on a discounted loan, with a 15% compensating balance 11.40 d. Interestigured as 3% of the $100,000 amounts payable at the end of the year, but with the loan amount repayable in monthly installments during the year Which alternative has the lowest effective annual interest rate Select