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Francis Construction Co. has an outstanding bank loan of $600,000 at an annual interest rate of 8%. The company is required to maintain a 20%

Francis Construction Co. has an outstanding bank loan of $600,000 at an annual interest rate of 8%. The company is required to maintain a 20% compensating balance in its chequing account. What is the annual interest cost on the loan?

8.0%.

9.5%.

10.0%.

6.40%.

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