Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest. On October 1, 2018, Island and Mutual Bank execute an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 2020.

What effective interest rate will Mutual Bank use for the restructured note?

Multiple Choice

• 8.9%

• 10.0%

• 8.7%

• 13.1%