Ms. R. Goslin has applied for a revolving credit line of $ 9 million to assist in marketing a new product line. The terms of the loan will be as follows:

a) All the loans will be discount loans

b) A fixed commitment fee of 0.4 percent on the unused portion of the loan will be charged.

c) The compensatory balance requirements will be 5 percent on the outstanding loans and there will be none on the total line of credit

d) The rate of interest to be charged will be the prime rate plus 4%

e) The bank will pay 3% interest on the demand deposits

f) The credit line will be extended for a period of 20 years.

The loan officer estimates that Ms. R. Goslin will use about $ 3 million of the credit line on average. If the prime rate is 6 percent and the required reserve rate on demand deposits is 1^ percent. Compute the effective yield for the bank.

a) 12.01%

b) 12.21&

c) 12.41%

d) 12.61%