H2M is currently cash-constrained and must decide whether to delay paying( not taking advantage of early payment discount) one of its suppliers or take out a loan. They owe the supplier $12,500 with terms of 1.8/10 net 40 H2M is considering two options.

Option A: forgo the discount on its trade credit agreement, wait and pay the full 12,500 in one month.

Option B: borrow the money needed, $12,275, to pay its supplier today from Bank A, which has offered a one-loan at an APR of 12%. The bank will require a (no-interest) compensating balance of 4.7% of the face value of the loan and will charge a 105$ loan organization fee. bEcause H2M has no cash, it will need to borrow the funds to cover these additional amounts as well

Calculate EAR for each Option. which Option Should H2M take?