Hand-to-Mouth is currently cash-constrained, and must make a decision about whether to delay paying one of its suppliers, or taking out a loan. They owe the supplier $13,000, but the supplier will give them a 2.2% discount if they pay by today (when the discount period expires). That is, they can either pay $12,714 today, or $13,000 in one month when the net invoice is due. Because Hand-to-Mouth does not have the $12,714 in cash right now, it is considering three options: Alternative A: Forgo the discount on its trade credit agreement, wait and pay the full $13,000 in one month. Alternative B: Borrow the money from Bank A, which has offered to lend the firm $12,714 for one month at an APR (compounded monthly) of 12.2%. The bank will require a (no-interest) compensating balance of 4.8% of the face value of the loan and will charge $95 loan origination fee, which means Hand-to-Mouth must borrow even more than the $12,714. Alternative C: Borrow the money from Bank B, which has offered to lend the firm $12,714 for one month at an APR of 15.2% (compounded monthly). The loan has a 0.7% loan origination fee. Alternative A: The effective annual cost is