John Smith has a 6% outstanding bank loan with a 10% compensating balance. Which of the following statements is correct?

a. The effective interest rate on the loan is more than 6%.

b. The effective interest rate on the loan is 6%.

c. The effective interest rate on the loan is less than 6%.

d. The effective annual interest rate of the loan depends on the loans maturity date.

e. None of the above are correct