On October 31, 2011, Simeon Builders borrowed $16 million cash and issued a 7-month, noninterest-bearing note. The loan was made by Star Finance Co. whose stated discount rate is 8%. Sky's effective interest rate on this loan is: (Explain how you got the answer)

a) More than the stated discount rate of 8% b) Less than the stated discount rate of 8% c) Equal to the stated discount rate of 8%

Please also explain how you came to your answer