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If a firm borrows $100M from a commercial bank with interest rate 8%. But the bank requires the firm to put 5% of the total

If a firm borrows $100M from a commercial bank with interest rate 8%. But the bank requires the firm to put 5% of the total borrowings in the bank as a compensating balance. What's the real cost of the debt?

8.0%

Higher than 8%

Lower than 8%

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