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Jackson Industries has borrowed $125,000 under a line-of credit agreement. Although the company normally maintains a checking account balance of $15,000 in the lending bank,

Jackson Industries has borrowed $125,000 under a line-of credit agreement. Although the company normally maintains a checking account balance of $15,000 in the lending bank, this credit line requires a 20% compensating balance. The stated interest rate on the borrowed funds is 10%. What is the effective annual interest rate of interest on the line of credit?

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