Hayley's Theatrical Supply is in the process of negotiating a line of credit with two local banks. The prime rate is currently 8 percent. The terms follow:

Bank	Loan Terms
1st National	1 percent above prime rate on a discount basis and a 20 percent compensating balance on the face value of the loan.
2nd National	2 percent above prime rate and a 15 percent compensating balance.

(a) Calculate the effective interest rate of both banks.

(b) Recommend which bank's line of credit Hayley's Theatrical Supply should accept.